Everyone agrees that
The problem is, buy-to-let offers the security of bricks and mortar with the possibility of rising prices and rising rents, while innovative businesses offer risk and uncertainty - but they are more important to our future.
Innovative companies can have significant value in their intellectual property, usually a copyright or a patent. But unlike a buy-to-let property there is no confident market price for a patent, or a well-functioning market. Banks do not lend against collateral they can't value. But we live in an era in which intellectual property and so-called intangibles - from databases and computer programmes to brands and management knowhow - are ever more important.
Large companies know what it means to thrive on their intangible assets and intellectual capital. Pfizer's bid for
Big Innovation Centre estimates suggest that high-growth firms have 74% more intangibles and IP on their balance sheet than their slower-growing counterparts. But they don't get much financial support. From 2001-07 the centre's calculations show that the total capital raised in the
For decades accountants and economists have reduced the notion of intangibles to the catch-all term "goodwill", to explain why investors are willing to pay a price which far exceeds companies' book value. In a world in which investment in intangibles now exceeds tangibles (buildings, machines and raw materials) -
The coalition is creating the
* Develop insurance schemes that underwrite the value of the intangible assets of growing companies so that bankers know they are lending against an asset with a calculable worth.
* Work to create and improve the markets for intellectual property.
Modelled on the successful pre-privatisation 3i - a public-private partnership, but embedded in the private sector - the innovation bank would become a key institution for a 21st-century industrial policy.
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