Many of my colleagues in the House of Common have prior business experience. But I’m in a relatively small minority of MPs to have taken a business through the whole cycle; from start-up in a garden shed, to a listed company on AIM. So this is a subject in which I take a very personal interest. Yet as we know, the future of British mid-cap companies is an issue in which the whole country has an interest. Mid-caps account for just 1.4% of British businesses, but they are the backbone of the economy, generating more than a third of our jobs and GDP. This sounds impressive, yet the evidence suggests that the sector is underperforming its international peer group. The research we’ll be looking at tonight shows that if British mid-caps had grown at the same rate as their German counterparts since 2009 then an extra 240,000 jobs would have been created. This is thwarted growth. But why shouldn’t we be able to create a British mittelstand here in the UK? And what must Government do to make that happen? On the supply side, the answers are familiar to us all: First, create a tax and regulatory regime which supports enterprise. Second, develop a workforce that is fit for purpose: one that has the skills and flexibility to compete with the best of the rest of the world. I believe we’ve made progress on both fronts – whether it’s cutting corporation tax, ...slashing red tape, ...giving schools the freedom they need to drive up standards, ...or investing in apprenticeships for young people. In time, these reforms will bear fruit. But what can Government do right now to help on the demand side? After all, even if they’ve succeeded in recruiting the best and the brightest, mid-caps still face the enormous challenge of access to capital. This is especially true of those companies which grew dependent on bank debt during the credit boom. Yet I for one do not believe we should be too nostalgic for the easy money of the credit bubble. Debt forces a company to frontload on risk, while the lending institution enjoys a fixed rate of return. Debt drains capital away from entrepreneurial activity. And as Xavier Rolet has said, instead of promoting a positive ‘can do’ attitude, it tends to concentrate the mind on merely avoiding disaster. Rather than castigating the banks for failing to lend, I believe policymakers should think harder about equity as a means of funding the growth of mid-cap companies. Equity aligns the interests of investor and firm far more closely than debt. And in AIM we have one of the most successful small and mid-cap markets in the world. It’s the route we took for my own business when we first listed, and it allowed us to fund acquisitions that are now growing faster than the original UK business. Yet the evidence suggests that equity too is failing to supply the mid-cap sector with the capital it needs to grow. Last September only 14% of QCA firms reported that equity markets had helped them to grow. At the same time, the number of venture capital investments made across Europe every year has collapsed in half, from £6 billion to £3 billion. The problem is caused by a lack of liquidity in the markets, chronic undervaluation by nervous investors, and more stringent expectations of what it means to be investor-ready. The Government has not stood idly by. Indeed, its response reads like a long shopping list: - 10,000 new loans worth £1.5 billion offered via the National Loan Guarantee Scheme - The Enterprise Capital Fund - The Business Growth Fund - The Business Finance Partnership - Tax reliefs for entrepreneurs - And most significantly, the extension of the EIS and VCT schemes to cover larger investments, as well as a new tax relief of up to 50% on seed funding. Yet in a way, it’s the very comprehensiveness of the shopping list which is part of the problem. The current set-up is too complex, with the many types of support on offer delivered by a bewildering array of different agencies. For many entrepreneurs - and young entrepreneurs in particular - navigating the system is all but impossible without professional help. This is unacceptable. When young people apply to go to university, the system is designed to make the application process as straightforward as possible. A single portal - UCAS - provides all the relevant information in one place. I believe we need to work harder to make the process of setting up a business equally straightforward. A ‘direct.gov’ for entrepreneurs, if you will. But this is really a point about presentation rather than policy. What else should Government do to help direct capital to small and mid-cap companies? When we think about equity markets we tend to think of corporate bodies like funds, but I believe we should seek to reopen the market to individual investors. There are many people out there who are ready and willing to put their money up in support of high growth companies. You may have heard of the Kickstarter website, an online platform which crowdsources micro-investments for creative projects. In three years it’s raised $200 million from 2 million individuals. Then there’s the Funding Circle, a UK based platform which allows lenders to spread their risk by issuing loans to a pool of businesses. It’s raised £37.5 million since 2010. In the United States the benefits of crowdfunding have been recognised in law as part of this year’s JOBS Act. The Act allows entrepreneurs to raise up to $1 million a year in equity while remaining exempt from financial regulation. Individuals who earn less than $100,000 can invest up to $2,000 per company a year, while those who earn more can invest up to 10% of their income. This works on the principle that government shouldn’t be too protective of people who are willing to put up modest amounts of capital in support of entrepreneurs. I believe there is a strong case for looking to apply this principle here in the UK. We’ve lived through the biggest financial crisis in living memory and the biggest barrier to the success of UK mid-caps is confidence. The point of all these measures must, in the end, be to inspire confidence in business. Confidence that the Government is on their side when it comes to dealing with regulation, Confidence that they can get the capital they need to grow, And confidence that we will continue to maintain the economic stability on which our prosperity depends.