By Kate Holton
LONDON (Reuters) - The coronavirus pandemic will reset the balance between private companies and the state in Britain and could in time produce a more productive economy, according to the man leading a 15 billion pound ($19 billion) drive to support smaller firms.
Stephen Welton, head of Business Growth Fund (BGF), the most active investor in fast-growing British companies, is talking to the government, insurance companies, pension schemes and other investors to recapitalize businesses and prevent more permanent scarring.
Central to any recovery, he believes, is the need to identify which companies can still grow in a post-COVID world. Unsustainable debt built up during this period then needs to be restructured and possibly turned into equity, before capital can be invested to drive future growth, according to Welton.
Such an intervention across every sector and region of the British isles also provides the opportunity to direct support at the most productive companies, those with a greener footprint, those in the life sciences sector and those led by women, to address some faultlines in the UK.
"We don't want to end up with a series of businesses that are effectively just trading and living from month to month on a zombie-like basis," he told Reuters, adding that the right combination of public-private partnerships were now needed.
"I don't think (the economy) is fundamentally going to turn in a different direction but is the balance going to change? Yes I think it will," he added in a telephone interview.
With COVID-19 upending the economy, the British government has paid the salaries of more than 10 million people, offered tax breaks worth 20 billion pounds and provided more than 30 billion pounds' worth of state guarantees for loans and grants.
Any recapitalization will need to be launched before those schemes end, Welton said. BGF was established in the wake of the 2008 financial crash by major banks and has invested around 2.3 billion pounds as a long-term partner into restaurant chains, engineers, software and digital groups, generally outside London.
With financial backing from Barclays, HSBC, Lloyds, RBS and Standard Chartered, it made operating profit of 133 million pounds in 2019.
Its support could in time double and Welton is now working to "crowd in" funds from private investors.
"(This is) unprecedented, which is why we're going to have to come up with solutions that are unprecedented," he said.
"If we wait for the government to come up with solutions in every single sector, I just think that is from a practical standpoint unrealistic and from a time standpoint too slow."
($1 = 0.7946 pounds)
(Reporting by Kate Holton; Editing by Andrew Cawthorne)