When I joined the Home Civil Service in October 1986, I went to London to work in the Small Firms and Tourism Division of the Employment Department at Steel House on Tothill Street. I had a fascinating introduction there to Government, Whitehall and the institution that spawned Sir Humphrey Appleby.
I make no apologies for having been proud to be a civil servant. I believe in the public service ethos. An ethos that has changed over time, but which may be traced back to before Samuel Pepys was clerking for Charles II’s Navy Board. I, however, had the dubious pleasure, during the course of my time in SFTD to observe at close hand one of those Masters of the World that have inhabited the City of London for a millennia.
The section within which I worked was interested in a range of issues affecting Small and Medium Sized Enterprises, but particularly access to finance. I am not sure how the meeting with the gentleman from the City came about, but I was asked to take the minutes when my Grade 7 section leader met with him.
I was not overly impressed by the appearance of this overweight chap, dressed in a pin stripe suit which he seemed to have slept in. To cap it all, the space between his suit stripes was at least an inch! A sure sign of a bounder, in my opinion. And there was no sign that he was a vigorous, innovative entrepreneur. Quite the opposite in fact, as we soon discovered.
My boss cut to the chase. Why were SMEs, particularly new business starts ups in manufacturing, technology and the like finding it hard to obtain finance in the City? The answer was straightforward, but surprising. They were not asking for enough money. What?
Put simply, the cost of appraising a request for funding in a manufacturing project was so expensive that City firms were looking to make investments of around £1 million so as to recover their appraisal costs. In other words, the analysts, for example engineering graduates, were making more money in the City than in industry and the cost of employing them was making it harder for industry to raise money.
The City in 1987 was looking to make investments of around £1 million when few business start ups wanted more than about £300,000 from the City. Hardly surprising then that the City switched to speculating with paper when it had effectively priced itself out of the market for investment in the real as opposed to virtual economy.
I formed the distinct impression, after the meeting was over that my boss was wondering why he had bothered to arrange it in the first place. All we had done was prove, beyond reasonable doubt that the City was closed for business as far as most SMEs were concerned. Kind of sounds familiar, does it not?