In advance of EISA’s upcoming event specially designed for financial planners, Mark Brownridge, Director General of EISA, asks if you are fully equipped to handle questions around the impact of a period of rapid growth in the alternative investment industry?
In the Spring Statement 2018, Chancellor Philip Hammond noted noted that the UK “are the UK’ is the champion of small businesses and the entrepreneur’.
The Government is slowly coming to realise what we in the EIS/SEIS/BR industry have known for years; that SMEs and entrepreneurs are the lifeblood of the UK economy. Statistics from the British Business Bank Small Business Finance Monitor 2018 shows that there were 5.7 million private sector business in the UK at the beginning of 2017 and the SME sector overall (firms with 0-249 employees) represents 99.9% of all private sector firms in the UK, 60% of employment and, at £1.9 trillion, 51% of gross turnover.
So entrepreneurial activity in the UK is at a high tidal mark with the UK increasingly seen as the ‘go to’ place for entrepreneurs across the world. With EIS/SEIS, R&D tax credits, the low cost of setting up a company and an established and growing angel and private investor base (compared to the US where you can only invest in a small business if you are an ‘accredited’ investor) the UK is a start up mecca for entrepreneurs and there is increasing evidence that SMEs are seeking funding options outside of the traditional bank financing routes.
So what does this mean for EIS/SEIS?
The introduction of the new knowledge and intensive investment limits has come to fruition because there is clear evidence that young and innovative enterprises contribute substantially to economic growth and job creation and that venture capital funding fills a niche that allows necessary capital to reach some of the least developed and most uncertain ideas. It’s also clear the Government is keen to establish the UK as the ‘Innovation Nation’ with a focus on technology, artificial intellingence and life sciences as well as other cutting edge, knowledge intensive industries. Measures are rapidly being put into place to ensure the infrastructure is built to make this vision a reality. We already have a very low corporation tax environment, four out of the top eight best universities are in the UK, and last year over £8 billion of equity was invested in UK small businesses, £5.9 billion from overseas investors. The UK is open for business and EIS and SEIS play an important role early stage role in the funding continuum of those businesses. There is currently an obsession with scale up but you can’t scale up if you don’t first start up!
So the portents for deal flow are highly exciting. Not only are there are more small businesses (the majority potentially EIS/SEIS qualifying) than ever before but also more small businesses with the appetite and desire to scale up and grow quickly.
So the EIS/SEIS/BR industry has experienced a period of rapid growth and change. Are you up to date with these changes? Do you feel equipped to deal competently and confidently with client queries in this area? With the changes fuelling investor awareness and appetite for more knowledge in these two tax efficient areas of investing and as both types of investment provide attractive inheritance tax reliefs, we felt it was time to bring the industry together for an event, organised by the EIS Association, the independent trade body for the EIS and SEIS industry, to cover all the important questions being asked by financial planners at this time. The event will therefore provide individuals in the advisory community with a fully CPD qualifying session of informed opinion from industry experts on the relevant issues that we believe you face when advising in this area.
Director General – EIS Association