Smaller companies plateau in 2005

After a strong 2004, the UK smaller companies sector is expected to be sluggish for the next year, according to fund managers. Any movement that there is will come from two main drivers: private equity investment and earnings growth. Neil Hermon, head of pan-European smaller companies, Henderson Global Investors, says: "Smaller companies have had a phenomenal year up until the end of 2004. However, for 2005 it has gone flat. We expect this to continue as higher commodity prices and rising interest rates slow earnings growth." According to Hermon, the valuation gap has closed between s...