Small business stock market Ofex has hit out at regional development agency Advantage West Midlands' plan to launch a regional equity market, labelling it a scandal and a 'deplorable waste of public funds'.
The comments came after the European Competition Commission announced it had opened a formal investigation into the Investbx plans after a complaint by Ofex.
AWM, which has designed the # 3.8 million scheme, argues it will help close the equity gap by providing local small businesses with access to private finance.
The idea, which has developed over the past 18 months, has been approved by the Department for Trade and Industry and is supported by local businessmen such as John Crabtree, former senior partner of Wragge & Co, and Paul Bassi the executive chairman of property company Bond Wolfe and regional chairman of Coutts Bank.
EU Competition Commissioner Neelie Kroes said: ?At first sight, the Investbx project seems to be an interesting and innovative idea if competition concerns can be sorted out.?
The Commission was concerned that public funds would provide the scheme with an unfair advantage.
However, Ofex has slammed Investbx as expensive, uncommercial and unnecessary.
Simon Brickles, chief executive of Ofex owner Plus Markets Group, said the company was already serving the West Midlands SME community. ?AWM has to stop funding Investbx. It is throwing good money after bad,? Mr Brickles said.
?UK small businesses have access to private equity finance unrivalled in Europe. Both Ofex and AIM already serve the West Midlands and Investbx would be in our space. If I were a Birmingham citizen I would ask how much AWM have spent on this project and why they failed to get clearance from Europe first.?
Ofex supports ten West Midland companies ? about seven per cent of the third tier exchange?s total listed firms.
Andrew Raca, corporate finance director of Birmingham stockbroker Arden Partners, fears AWM is making a costly mistake.
He said: ? Small or medium-sized companies have plenty of ways to raise equity capital. They don?t have to raise it through an artificial and ill-conceived structure such as Investbx.?
Charles Cattaneo, head of KPMG corporate finance in Birmingham and chairman of the Midland regional advisory group of the London Stock Exchange, said Investbx was a good idea that had arrived too late. ?It is a lovely concept. When the Investbx idea was born, smaller companies were having a hard time but in recent years with the increasing presence of AIM and Ofex the requirement for it has diminished.?
An AWM spokesman defended the Investbx scheme: ?The agency has a key objective in its corporate plan to promote innovation, entrepreneurship and business growth. There is a well-acknowledged equity gap in the market with the most severe failure for businesses seeking to raise up to #2 million of growth capital.
?Investbx is an innovative response, with AWM using its influence to bring regional stakeholders from the professional community around the table. The agency has committed #3.8 million over six years to kick-start a local equity market to remedy the gap faced by SMEs across the region.?