Dr Vince Cable’s relentless march to deification took a bit of a knock last month when he suggested regional stock exchanges could be re-introduced across the UK to act as conduits for capital to flow into local enterprises.

On paper, it’s not a bad idea, though in practice, the notion is a non-starter.

As banks appear to have given up lending to small businesses on anything approaching favourable terms, regional stock markets are proposed as a means to ‘help develop regionally-focused sources of business finance’, but one wonders whether the idea is worthy of further consideration.

Regional stock exchanges were rarely the principle source of fresh capital for companies, although between 1862 and the pre-First World War investment boom, the London Stock Exchange was tremendously busy, as companies investing in large plant preferred to issue shares, rather than borrow from banks.

Nevertheless, by 1913, industry, other than railways, was still financed to only a small extent by the stock exchange.

In fact, at the turn of the 19th century, the industry most likely to raise capital via the stock exchange was brewing, mainly to finance the race to tie independent public houses.

The main problem with re-introducing the UK’s regional exchanges is this: where would the money required to trade shares in local companies actually come from? How many small business angels would be interested in financing local firms?

Indeed, because the tax incentives associated with vehicles such as Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCT) are so attractive, business angels actually don't require a platform via which they could trade shares in small companies, not least because to do so could jeopardise a scheme’s tax incentives.

Virtually all investors in small, unlisted companies prefer to wait until the company floats or finds a trade buyer before realising their investment.

Liquidity is another problem — if the London market, home to around £1.6 trillion in investor funds, can occasionally suffer from a lack of liquidity, especially for companies quoted on the AIM or Plus market, the chances are this situation would be exacerbated on a local basis.

Naturally, the London market didn’t take kindly to Dr Cable’s proposals and it’s hardly likely to encourage institutional investors to plough capital into regional exchanges. If institutions are lukewarm on the proposal, there’s almost certainly little appetite among independent investors.

One of the biggest bugbears for small companies contemplating listing on London’s junior markets is cost.

The process is bureaucratic and peppered with opportunities for professionals to levy eye-watering fees to ensure companies adhere to the rules. The ongoing cost of maintaining a listing bites deeply into a company’s profits, which rather defeats the object of listing in the first place.

So, regional UK stock exchanges lack scale, would have difficulty attracting capital, run the risk of being uncomfortably illiquid and in any event, there are at least two methods by which (admittedly larger private investors) can buy into small companies and obtain generous tax breaks to boot.

From an investor’s point of view — and I speak from personal experience — there’s one other massive problem to address, which is this: investing in small organisations is extremely risky.

About 15 years ago, I and several others bought into one small company after seeing its operation — which looked impressive — and spending time going through its accounts.

However, it transpired that the owner from whom we bought had doctored the accounts. They failed to reveal the equipment we thought we were buying was, in fact, leased.

Furthermore, although he left the company — and subsequently went bankrupt a month later — the business was losing around £75,000 a year instead of making £56,000, as we had been led to believe.

It took a lot of incredibly hard work to turn the company around and make it profitable before we were able to sell it.

Perhaps, as the cost of listing on junior markets acts as a huge disincentive for many companies, Dr Cable would be better employed addressing this situation, rather than regurgitating ideas for which there is little enthusiasm.

Reducing the cost to companies of attracting new capital would be a welcome boost for entrepreneurs and would have a beneficial effect upon the economy.