Experts sceptical over return of Birmingham stock exchange
Jul 30 2010 by Graeme Brown, Birmingham Post
Plans to resurrect the Birmingham stock exchange could flounder due to investor apathy unless they are made very carefully, a leading local stockbroker has warned.
This week, business secretary Vince Cable outlined plans to reintroduce regional stock exchanges in a bid to help smaller local firms raise money.
If the plans were carried through, it could see the return of the Birmingham exchange, which traded on Great Charles street for more than a century until being absorbed by London in 1971.
But Gary Callow, the investment director at Colmore Row brokers Williams de Broe, said it would be finding investors and not companies that would be the main stumbling block for any plans to bring back the Birmingham stock exchange.
He said: “It’s obviously going to be small and medium-sized enterprises that struggle to justify the cost of a listing at the moment that this will appeal to. But is there going to be the investor appetite?
“It’s going to be high-risk and in the current market investor appetite for that isn’t going to be very good. I think the concept sounds interesting – it could be cost-effective and could be a way of financing at a time when lending is hard to find. The theory is to localise things, but the reality is that the devil will be in the details, and investor liquidity is going to be an issue.”
He also added he was cautious after the mixed response to local trading platform Investbx, which has been running from Colmore Row since 2007. In the three years it has been running the platform has ‘floated’ just three companies, but still insists it could be a model for a full-blown regional exchange.
A spokesman for Investbx said: “The regional exchange model being proposed by the Business Secretary is one that has been in operation in the West Midlands since 2007 and we are delighted this issue is on the agenda.
"Investbx is the inaugural regional exchange of the 21st century and, as a result, people have been watching with interest to see how the idea has developed, even against the backdrop of the global downturn in investment markets. Unfortunately, this is the environment in which we have had to become established.
“It is clear that innovative ways of securing investment will be necessary to help regional companies grow. Regional exchanges are just one of the ways this could be achieved.
“We strongly agree that it’s vital that lifeblood businesses of the regional economy get the help they need while at the same time we reduce the UK economy’s dependence on the City of London.”
Dr Cable has started a consultation process on regional stock exchanges.
Birmingham’s exchange was originally opened in 1845, as a result of the city’s thriving industry and reputation as an international commercial centre.
Members met in the old Royal Hotel and various hired rooms in Waterloo Passage, before moving into its own premises on the corner of Margaret Street and Great Charles Street.
It was absorbed into the London Stock Exchange in 1971 and remained a subsidiary hub until the Big Bang in 1987, when the traditional trade floor was replaced with new technology.
Dr Cable’s proposal is to re-open the regional stock exchanges to make it easier for firms to attract investment. Birmingham, Edinburgh and Glasgow would be the first candidates.
Dr Cable said he believed medium-sized firms were being excluded from raising finance by the cost of listing in London.
He added: “If we don’t anticipate and tackle finance barriers now we could face a big problem in the future.
‘‘Left unchallenged, a lack of accessible finance for businesses could prevent the recovery accelerating.
“I’ve heard the problems businesses are facing in getting bank loans. They need innovative ways to access finance from other sources to grow. That’s why this green paper is so important as we look to help viable firms get the money they need.”
