So, the latest HMRC EIS/SEIS statistics released in May tell us that in 2016-17, 3,470 companies raised a total of £1.797 billion of funds under the EIS scheme. On a trending basis, this is down on the previous year but as always we expect to see these numbers revised upwardly at the next data release point
So where does this leave us as an industry? Firstly, good news. EIS and SEIS continue to be popularschemes both with investors and small businesses seeking funding. In essence they work. They help provide small businesses with access to finance they might otherwise have not been able to get access to.
Secondly, although the figures from last year don’t currently bear this out, its clear the investment landscape in EIS has changed dramatically due to the November 2017 Budget. Those schemes that targeted capital preservation investment strategies have been forced to change their investing philosophy and adapt to the new growth world order. We won’t see the effect that will have on investor sentiment until the release of figures from HMRC in May next year but the likelihood is that they will be well under £1.797 billion. Why? Largely because most investors have been fed capital preservation deals for a number of years so they will either need some time to adjust to the new investment philosophy or will see the attaching perceived rise in risk profile as being too rich for their blood and turn to alternative investments.
This then presents a challenge to our industry. How do we keep those investors who have previously invested in capital preservation EIS deals investing in EIS’s which now have a very different look, feel and more importantly risk profile? Or a bigger question still, how do we make EIS accessible to an even wider group of investors? After all, there are estimated to be approx. 500,000 HNW individuals in the UK and currently only 29,860 invest in EIS on an annual basis. If our industry is to continue to grow we need to find new and deeper pools of potential investors to help provide the finance for the new, exciting, entrepreneurs our fund managers hope to fund.
TALKING POINTS
In the Talking Points, I have outlined some thoughts (musings in some cases) as to how we could make our industry bigger and better. Some of them are sensible, some wishful thinking, some I support, some I don’t and some are possibly even controversial! I outline them to spark debate and would be delighted if you wantedto add your voice to the debate and email your own thoughts or speak to me in private.
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OBEISANCE
The British Business Bank has launched a new British Patient Capital programme to enable long-term investment in high growth potential companies across the UK.
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ROUND UP FROM THE COMMITTEES
Once again, our committees round up gives you a valuable insight into the work of each of our 5 committees and hopefully brings you to speed with the initiatives EISA currently have in progress. My thanks to everyone involved in EISA committees for their hard work and engagement.
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I hope you enjoy ZeitgEISt. We would welcome any feedback or suggestions for future editions.
Regards
Mark Brownridge
Director General, EISA