VENTURE CAPITAL FOR INDUSTRY

Press, Volume LXXXIV, Issue 25554, 23 July 1948, Page 11

VENTURE CAPITAL FOR INDUSTRY

SHORTAGE REPORTED IN UNITED STATES

IMPLICATIONS FOR BRITAIN grJIS,® B hortage, actual or impending, of ♦ capita i for industry in the UnixB a subject which has been discussed at some length in a number 2L.£ me ? riCBn bank reviews lately. In mentioning this, “The Times Review of industry says that these discussions have obvious implications for trade and industry m Britain.

In the National City Bank Review recently it was stated that “the individual investor has come close to disappearing as the source of new capital for private business,” and the Guaranty Survey states mat there seems to be no serious disagreement as to the existence of a large shortage of venture capital.” The National Association of Manufacturers (of the United States) estimates the current deficiency of 8,000,000.000 dollars annually. It points out that commercial bank Loans rose rapidly in 1946 and 1947, while individual holdings of corporate securities showed no increase whatever, indicating that business concerns were forced to resort to commercial banks to meet some capial requirements that should nave been financed by the sale of securities to investors. It is generally agreed, in the words of toe Guaranty Trust, that the United States now faces a period of large and sustained demand for new capital “to supply the needs of • growing population, replace worn-out and obsolete plant and equipment, and give effect to technological imprevements.”

Britain Also Affected Cne of the main causes of the situation is undoubtedly the heavy tax burden that has been laid on individual incomes, especially those in the higher brackets, which it is generally agreed are the principal source of the savings that normally supply the great bulk of venture capital. The almost confiscatory rates on large incomes leave relatively little surplus for investment in equity securities and little incentive to assume the risk that such investment necessarily involves. The situation is aggravated by estate taxes, which further weaken the incentive to risk-taking investment and depress the market for equity securities both by forcing hasty liquidation and by breaking up large estates into smaller units for which such securities represent a less suitable form of investment. Furthermore, the long-term outlook for business concerns has been weakened by tax laws and by high and inflexible costs. Tax rates cn companies represent a strong deterrent to expansion, especially that of the more venturesome sort.

“If all this is true of the United States,” says "The Times,” "how much more directly it must apply to Great Britain, where all the above-mentioned factors making for reduction in risk-taking capital.are reinforced several times over. It is exceedingly doubtful whether in the next few years there will be any real private saving on balance, after allowing for all the offsets, and certainly it would be futile to expect any fundamental change in our tax laws and regulations which would reverse recent trends. To a large extent, therefore, business must rely upon its own savings in the form of undistributed profits for its development.” HIGH PRICES FOR LEAD UNITED STATES INTEREST London metal quarters believe that up to 20.50 cents per lb (£ll3 8s lid a ton), c.i.f. New York, has been paid by United States trade interests for foreign lead, with duty, if still operative on arrival of the metal, on buyers’ account. This represents the highest price so far reported since United States consumers started their quest for bigger overseas tonnages to eke out domestic supplies. The shortage at present being experienced there is understood to be due more to the unprecedented demand than to actual production difficulties. OutpUt is at a high rate and, given freedom from strikes, etc., total production this year is expected to show a 10 to 15 per cent, increase on the 1947 figure of 583,716 short tons. There is, however, reason to suppose that demand has to some extent been stimulated by fears of a Shortage resulting from Government stockpiling intentions. a A Washington message states the Sen-? ate Finance Committee has approved a bill designed to stimulate the importation of lead by suspending import duties until June 30, 1949. This measure, which has already been accepted by the House of Representatives, now goes to the Senate. The proposed legislation would suspend tariffs on lead-bearing ores, mattes of all kinds, lead bullion or base bullion, lead in pigs and bars, lead dross, reclaimed lead, scrap lead, antimonial lead and antimonial scrap lead. Financial sources in New York report that opposition is being organised to the reimpositton of the tariff -on foreign copper. GROCERY NOTES The demand for tinned soups and other winter lines is not diminishing, and good supplies of these commodities are still available from packers. A limited supply of spaghetti in lloz tins to retail at 10d and 10Jd, town and country, respectively, has recently been released by one manufacturer, and should prove to be just as popular as the larger sizes on the market.

A further allocation will be provided for imports of dried figs from Turkey to the extent of 150 per cent, of the value of 1938 imports from the same source. It is anticipated that this fruit will arrive in New Zealand in time for the Christmas trade.

Canned Fruit.—When new season’s Australian canned fruit comes to hand landed costs will be higher by approximately 3s a dozen, and although no advice of shipment has yet been received new selling rates authorised by the Price .Tribunal will be:—peaches and apricots, first grade, 30oz cans, 2s 4id and 2s 6jd; 16oz tiry, Is 6id and is 7jd. Pears, 30oz, 2s 6d and 2s 7Jd; 16oz. Is 6jd and is 7Jd. Two fruits, 30oz, 2s sjd and 2S 7d; 16oz, Is 6Jd and Is 7Jd, town and country respectively. Seconds in 30oz tins are id a tin less.

Dried Apricots and Peaches.—Following the anouncement that import licences will be granted for dried apriedts and peaches, prices now quoted for South African show a slight reduction on previous costs, but are subject to export licences being granted so that in the meantime supplies from this country are doubtful. It is indicated that good supplies of dried peaches will be available from Australia, but apricots will be scarce. A shipment of dried apricots, ex a previous licence, is at present being unloaded at Lyttelton. Glucose.—An unexpected shipment of a popular pack of glucose from the United States has arrived and is now in the course of being distributed in very limit* ed quantities only. Landed costs for this shipment are slightly higher, but this will not affect the present price to the consumer of 2s lid a tin.

Epsom Salts.—Advice has been received that shipments of Epsom salts in bulk are coming forward. There is a demand in the country districts at this time of the year. Prices will be up by approximately £3 a ton.

Neatsfoot Oil.—Prices for a recent shipment of Neatsfoot oil in four-gallon tins have advanced by 20 per cent., and although supplies are sufficient to meet the demand, large quantities are now being shipped overseas at a further advance of at least 20 per cent, on the home consumption price. AMERICAN DEMAND FOR WOOL The domination of the world’s wool markets by the exporting demand of the United States is the subject of comment in the annual report of rhe New Zealand Wool Board. In explaining that the wool levy on growers was to be increased to 2s 6d a bale, Is 3d a fadge, and 5d a bag, from 2s, Is, and 4d respectively, as at present, the report gave as one of the main reasons the need to pay, through the International Wool Secretriat, for more promotion and publicity work in the United States. During the war there had been a great swing of American buying in favour of wool, and the country was now using a quarter of the world’s apparel wool production. The demand in the United States was for fine wool fabrics. The International Wool Secretariat, along with the American Wool Council, was endeavouring, through research work at Princeton University, so to improve the handling of crossbred wools that they Could find A place in filling this American demand. WORLD PRODUCTION OF WOOL INCREASE ESTIMATED FOR 1948 The United States Office of Foreign Agricultural Relations estimates world wool production this year at 3,830,000,0001 b —100,000,0001 b or 2.7 per cent, above the revised estimate for 1947. Production exceeding that a year ago is indicated for nearly all continents except North America, where output has been declining for six years, it is stated. The department adds that strengthening of wool prices during the last year has tended to cause wool production to be maintained or increased in most of the important wool-producing countries.