Capital Markets for Growing Companies: A review of the ELR

Europe must be more competitive if it is to deliver jobs and growth for its 28 Member States and 500 million people. It is from businesses of all sizes in the private sector that this competitiveness challenge will be met.

If firms are able to raise money from a rich variety of sources, including in the form of debt and equity, they will be better able to fulfil their growth potential and compete in the global economy.

Two out of every three employees in the EU work in small and medium enterprises (SMEs), which make up 99% of Europe’s firms. SMEs have traditionally relied on bank lending – more than 70% of SME finance comes from bank loans. Banks will continue to play a central role in SME finance, but their ability to lend has been constrained by the necessary post-crisis measures put in place to strengthen the financial system.

The creation of a Single Market for capital would enable businesses to access deep and liquid pools of capital across the whole continent. The European Commission has set itself the task of creating a Capital Markets Union (CMU) to realise the founding principle of free movement of capital for the benefit of businesses and people in every Member State.

In the Budget of March 2015, the Chancellor of the Exchequer invited TheCityUK to conduct a review of the European Listings Regime to inform the CMU debate with an understanding of how markets can work better for firms of all sizes. This report shows how Europe’s corporates could be enabled to raise money more quickly, more cheaply and from more diverse sources. As part of a varied ecosystem of business finance, equity, debt and other capital markets can help firms innovate and grow for the benefit of us all.