HBG Holdings, a UK based private equity investor and fund business specialized in the Middle East, is set to invest $500m in small and medium sized enterprises in the UK, specifically targeting companies with potential to expand operations in the UAE and the GCC states.

The initiative comes at a time when the new British government is taking steps to increase trade with the UAE and GCC. A taskforce has been set up to help raise UAE UK bilateral trade from £7bn to £12bn by 2015.

The private equity investor has confirmed that it has commenced investing from its Shariah Small Cap Fund primarily in high growth companies listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

HBG Holdings executive director Michael Toxvaerd said the global financial crisis has been challenging for the AIM market with many companies suffering from lack of liquidity and dislocated credit markets.

"The maturity profile of LBO debt is also likely to have a knock on effect on smaller firms in the medium term. In these circumstances SSCF can play a pivotal role in financing growth companies," Toxvaerd said.

The announcement follows HBG’s recent investment in AIM listed Northbridge Industrial Services which has operations in the Middle East.

HBG Holdings group managing director Zulfi Hydari said at a time when the UK government is urging British firms to engage fully in fast growing emerging markets, HBG is doing its part to facilitate capital flows from the Gulf into small cap companies in the UK.

"We believe this initiative is unique in its ability to help growing firms in the UK access capital from overseas and will encourage them to invest and expand in the Middle East," Hydari said.