The third motivation for more equity is that some companies who can bridge the virus disruption effectively with more debt could then consider their balance sheets overstretched. During the crisis, debt is the natural – fastest – way to raise finance for most companies. That’s why so much support has been provided to allow it to be raised. But it could leave an overhang. That overhang won’t be one that, at current interest rates, presents an acute problem. The share of companies with interest payments taking up a material fraction of revenues is likely to remain low. But it could create a chronic issue for the economy in the longer term. Greater leverage could damage companies’ ability to refinance and access new capital when dealing with future stresses. Governmentguaranteed loans may need to be refinanced at higher rates in future. Looking ahead to these possibilities, many prudent companies will want to repair their balance sheets, holding back on employment and investment to work the overhang off through time. 10  Source: Office for National Statistics 7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7  With enough companies in that position, what makes sense individually could be harmful collectively; it could drag future growth. So it is essential to give companies every means to repair and restructure balance sheets by issuing equity to repay debt. With these three important motivations, the good news is that equity issuance is already strong.
More public equity has been issued so far this year than at the same point in any year in the past decade. [See slide 5 of accompanying deck]  But that issuance has all been by listed companies. On our estimates, the vast majority of the possible equity needed will be for companies not listed on a stock exchange. And so the challenge is to give a wide range of businesses every opportunity to access growth capital. That’s capital willing to invest in assets – like unlisted equity – that can’t easily be traded and doesn’t deliver a quick or stable return. Unlocking more growth capital  Unlocking more growth capital is not a new challenge. Three years ago, the Treasury launched a review of what it called Patient Capital. Since then, many changes have been made. The Pensions Regulator has clarified its guidance to funds. New funds, including British Patient Capital (a subsidiary of the British Business Bank), were established. And the Financial Conduct Authority now permits retail investors greater access to funds invested in illiquid assets. There is more to do. And the need for more equity finance to minimise the scarring to the economy now creates a case for ambition. A range of authorities have a role to play. Lots of attention tends to be given to schemes and ideas involving public money and the taxation of equity relative to debt.