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Tuesday 11 December 2012

Immunising entrepreneurs from the market won't plug the funding gap

Anthony J. Evans is Associate Professor of Economics at our London campus. Since 2011, he has been writing a weekly column for City AM, a free business paper you can pick up from our reception every day. If you aren't able to get your hands on one on a Tuesday - the day Anthony's column is published - you can always catch up online via City AM's archive.

This week, Anthony looks at the Coalition's plans to invest more in SMEs in order to boost the UK's economy. But is this really the answer? Prof. Evans argues that there has always been funding available to entrepreneurs, and that "when the government attempts to 'plug the gap' of SME finance, it distorts market information and entices marginal entrepreneurs into embarking on ventures that the market does not really support."

"... At the very least, publicly-funded schemes should recognize that they rest on an assumption that the market is passing up profit opportunities. They rely on a theory of market failure. This is possible – markets do fail. But it carries with it an easy test. Any public money that aims to correct market failures should generate above market returns."

Read the full article via the City AM website or by picking up a copy of today's paper in reception.

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