Acorns to Oaks – A Methodology

The regeneration of the UK’s SMEs through a UK Sovereign Wealth Fund If not this, what? If not now, when?

The Genesis COVID-19 Working Party, Chris Parr (Chair), John May and David Harvey have been developing proposals for a National UK Sovereign Wealth Fund, to provide the SME community with a route out of the current crisis towards prosperity and growth.

OBJECTIVE – To regenerate the UK’s SMEs after the C-19 crisis.

CONCEPT – See SMEs as a vast, untapped, under-developed “natural” resource for the benefit of the UK as a whole.

METHOD – Create a root, trunk and branch structure – in the style of an oak tree – that spans the country and provides the core resources needed for SMEs to emerge from the C-19 crisis stronger and better able to survive and grow.

ROOT – A sovereign wealth fund (SWF) of the nation’s money.

TRUNK – Connected groups following the natural geography of the country – a central core carried by HS2 and other, existing communications pathways.

BRANCHES – Local groups dedicated to their area but also connected to the whole in order to give and take support. Similar to the proven structure adopted by the Small Business Administration in the USA.

PRECEDENT – Sovereign Wealth Funds already exist. There is no mystery in their structure. The discovery of oil and gas reserves saw SWFs created around the world – Norway was particularly successful.

PROCESS – SWF injects cash to SMEs via a simple to operate and easy to access system. The SWF immediately takes ownership of X% of the SME. The SME then uses the cash to drive its business. Over time, the SME can buy-back equity, but the SWF will always hold (e.g.) 5% of the enterprise – this is the long-term value creation element. Alternatively, the SME can sign-up to a more classical loan with a fixed interest rate.

METHOD – Use high-tech systems of internal management and control. Use audit systems to spot-check compliance. Create mentoring and support services, across the country.

ISSUES

• SMEs fail – this matters less than might be expected. Provided that the cash is spent on the effort – wages, purchasing goods and services, assets and investments – the effect is to stimulate the economy.
• Money leaves the country – Mechanisms can be built in to push UK-focused spending. However, export/import activity must be respected.
• Fraud – use high-tech systems, compliance processes (banks, etc. already have these) and spot-check auditing.
• Political opposition – this must be a pragmatic, a-political system that puts regeneration ahead of political motives. This might be “socialist” in concept but it’s also very capitalist. The politicians must be made to avoid attacking the system for political purposes.
• Big business feels left out – bring the big companies in as supporters and sponsors. The big companies depend on the economy as a whole. If we can regenerate the SMEs, we should stimulate general growth and development for all.
• Banks and other traditional funding sources – They are not well placed to take the risks involved in this rescue package. However, the SWF could take in funds from the traditional funders and so create a participation opportunity.

You can find the detailed proposals here The UK Sovereign Wealth Fund