The circumstances surrounding the self-proclaimed demise of Plus are as convoluted as the plot of a whodunit by Stieg Larsson, whose UK publisher Quercus is listed on the micro-cap exchange. Moody sleuths Mikael Blomkvist and Lisbeth Salander would quickly identify the credit crunch, regulation and boardroom squabbling as suspects. But that would be little help to 156 companies that risk losing their listings or to small investors whose investments may be rendered worthless.

Plus is set to be subtracted from the UK financial scene after the bottom line of its owner, Plus Markets Group, slid into negative territory. Failing to find a buyer, it plans to wind itself up. Plus is a halfway house for small companies between staying private and getting a quote on Aim, the junior market run by the London Stock Exchange. But a scarcity of transactions and the illiquidity of shares meant a lack of listing fees, leading to the straits in which Plus now finds itself.

Fragile investor sentiment following the credit crunch is partly to blame. A broader worry is that investment in smaller companies via public markets is in irreversible decline. Aim statistics are hardly reassuring. In 2011, shares worth £38.6bn were traded on Aim, compared with £75bn in 2007. The tally of Aim-quoted companies has dropped from 1,694 to 1,117 and small-cap shares remain more deeply under water than larger peers.

It is impossible to know whether the trend is cyclical or secular, in the absence of an economic rally to raise demand for shares in small, risky companies. But it does not take a Swedish investigator with more piercings than a colander to work out that simultaneous shortages of equity and debt capital for small businesses will delay that recovery.

Thar he blows it

For fairness’s sake we shall assume that the nickname of the “London Whale” – a JPMorgan trader implicated in losses of $2bn– reflects his liking for prawns. The fact that “whale” is croupier’s slang for a punter who makes whopping wagers is surely a coincidence. However, the debacle strengthens the case for a separation of “utility” retail banking from “casino” investment banking.

That is the split the UK is sluggishly implementing in acceptance of the proposals of the Independent Commission on Banking. Of course, JPMorgan is not a UK high street bank and is big enough to withstand its cold bath on credit derivatives. But there is still a read-across from its woes to banks that the UK taxpayer implicitly guarantees.

The chief investment office, the unit that got JPMorgan into trouble, is distinct from its investment bank. It is supposed to manage JPMorgan’s balance sheet, which includes hedging. But UK banks that lend to retail and business customers would be prohibited from dealing in securities and derivatives on their own account under the ICB’s proposals.

There will doubtless be lobbying for these institutions to be permitted “prudent” hedging as legislation is elaborated. JPMorgan’s cetacean discombobulation should make it easier for the government to resist calls from banks to erect a low ringfence behind which proprietary trading could easily occur. Incidentally, the last notable London whale wandered up the Thames in 2006 before conking out ignominiously under the scrutiny of the world’s media. Prophetic.

Shirt tale

Paul Smith was disillusioned with China when Lombard met him a few years ago. The fashion entrepreneur had just closed a couple of stores there because of high rents and low demand. He warned fellow retailers in apocalyptic terms against developing markets.

Now the stripes maestro is having another go. His eponymous private business is planning to open 24 shops in China over the next five years. Their fortunes will test the evolution of demand for luxury goods in the country. According to one theory, the recently enriched just want the most recognisable bling to proclaim their new status. Later on, some will seek subtler purchases to differentiate them within the ranks of the better-off.

The Japanese already have a well-developed taste for Paul Smith’s offbeat English clothes, supporting 61 standalone stores. But the bulk of sales of £171m and pre-tax profits of £27.3m last year were captured in Europe. At least the store openings will give Nottingham, the home town where Sir Paul maintains a business base, a chance to claw back some lost income. The city’s bicycle manufacturing industry was destroyed by cheap Asian imports, not least from China.

jonathan.guthrie@ft.com

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