A leading fund manager has called for the return of a Scottish regional investment exchange in order to boost support for a growing army of small businesses.
Justin Urquhart Stewart, founder of Seven Investment Management, said Aberdeen in particular could reap the benefits of diversifying its economy away from the oil and gas sector through galvanising local investors to support small firms.
Mr Urquhart Stewart, who is a well known commentator on financial matters, said the local investment exchanges would be similar to – but very different – from the historic local Scottish Stock exchanges that flourished in Edinburgh, Glasgow, Aberdeen, Dundee and Greenock from the mid-19th century until they were merged with the London Stock Exchange in 1973.
“I remember the days when we had six stock exchanges in Scotland,” recalled Mr Urquhart Stewart, who was in Aberdeen recently to address investors at an event hosted by the wealth managers division of Johnston Carmichael.
He joins his voice to several others that have throughout the years called for the return of local stock exchanges to invest in local companies. Critics have dismissed the proposals as being inneficient and backward. But new technology available through the internet and the emergence of crowdfunding could be combined in a new platform for investing in local firms, he believes.
He said: “Not that we should bring back stock exchanges, but you could argue a stock exchange is no more than a crowdfunding operation with advice.
“Why can’t we have online crowdfunding with advice, only for professional investors – no widows and orphans, and only certain companies – not pyramid schemes. This is one of the things I am proposing in Scotland, a regional investment exchange online.”
He points to an “astonishing” rate of growth in new ventures, particularly in Scotland that face being starved of funding from traditional lenders.
“Twenty years ago, between 150,000 to 180,000 new businesses a year were started in the UK,” he said.
“Four years ago that was 400,000 businesses and last year it was 520,000 businesses.
“That is an astonishing number. These are not just consultants, which is a euphemism for unemployed bankers. If you go to the business parks they are full.
“That is more than you are seeing in France and Germany.”
He said that these firms could tap financial support from local investors.
“People want to invest in local businesses but they don’t know how to do it,” Mr Urquhart Stewart insisted.
“When you had a local exchange you could invest in local business.
“That is more important in Aberdeen now because Aberdeen needs to try to find ways of diversifying – or learning to live with a cheaper cut of cloth,” he added.