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Home News Financing growth businesses across the EU

Financing growth businesses across the EU

26 March 2015
Financing growth businesses across the EU

How a Capital Markets Union could revitalise the economy

Policy Network has instigated a new research project to analyse in more detail the challenges of financing growth businesses across the European Union, and propose how some of these challenges might be overcome. This is a central question for the sustainability of a recovery across the European Union given the difficulties in relying on traditional bank credit. New avenues of finance therefore need to be opened up to fund growth businesses to regenerate the European economy thereby increasing the rate of job creation.

This project leverages off a number of recent assignments that Policy Network has undertaken looking at finance for growth issues across the UK for the Adonis Growth Review, as well as a number of pan-European projects completed for the CBI and the City of London Corporation assessing the direction and impact of key policies at the European level.

Financing long-term growth has been a priority for the European commission since the publication of their communication to the European parliament and European council last year, which has culminated in the announcement of a Capital Markets Union initiative in September 2014. This aims to bring about “a well regulated and integrated capital markets union, encompassing all member states by 2019 with a view to maximising the benefits of capital markets and non-bank financial institutions for the real economy”.

Our project is expected to be completed in the second quarter of 2015 and aims to feed into the policy debate on the Capital Markets Union agenda. The Policy Network project will consist of in-depth desk research of key relevant papers and analysis of available data on growth constraints for SMEs across Europe, and the various proposals to solve these real issues. This analysis will be supplemented by meetings with key national government advisers and officials as well with European officials. Discussions will also be held with SME representatives as well as with banks, insurance firms, stock exchanges, private equity firms and business angels across six jurisdictions including Germany, France, Italy, Poland, Sweden and the UK.

Key questions

•    Which kinds of businesses remain most finance constrained in your country and why?
•    Which financial products have the largest mismatch between supply and demand?
•    To what extent are alternative finance providers in conjunction with state-provided financial guarantees able to bridge the mismatch of supply and demand?
•    To what extent are polices to encourage the financing of growth businesses related to specific challenges within member states or at the EU level?
•    To what extent would greater access to a combination of long term loans and equity capital transform the financing of growth businesses?
•    What changes could be made to make equity capital more central to financing, and how might the insurance and pensions sector be better utilised for this purpose?
•    How relevant is increasing cross border investing given the localised nature of financing and the repatriation of capital during crises?
•    To what extent have recent regulatory initiatives including Basel III and Solvency II made it harder for financial institutions to finance SMEs, particularly with respect to securitisation?

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