Business guru warns of red-tape danger

Date: 14/03/02

By Peter Chapman

RED tape in a draft EU directive on prospectuses could cost UK companies an extra €1.61 billion - and drive many small firms away from stock exchanges, the head of the Confederation of British Industry warned yesterday (13 March).

Digby Jones said industry supported the aim of the directive, which is intended to allow firms use a single prospectus anywhere in the Union.

But he said plans to make companies register an up-to-date prospectus with regulators every year and moves to impose the same rules even for small firms were 'crippling and costly'.

Small firms currently exempt from many regulations could pay up to €500,000 each in costs to raise just €1 million in capital on low-cost second tier markets such as London's OFEX.

His comments came ahead of today's European Parliament vote on the issue. Jones said MEPs should back proposals by Liberal MEP Chris Huhne which would put matters right.

Earlier this week, the Parliament voted through a new regulation that would force EU firms listed on stock exchanges to use international accounting standards by 2005.

They backed a deal by member states that would give mainly German firms currently using American norms until 2007 to make the switch.

The move is expected to slash the costs of firms listed on more than one exchange and make it easier for international investors to compare companies.

Red tape in a draft EU directive on prospectuses could cost UK companies an extra €1.61 billion, and drive many small firms away from stock exchanges, Digby Jones, the head of the Confederation of British Industry (CBI) has warned.