Jenny Tooth reflects ahead of the new budget as British Business Bank release Small Business Finance Markets report
As we approach the end of February and with our new Chancellor Rishi Sunak poised to present his first budget on 11 March, it’s important to reflect on what kind of environment we want to create to ensure that angel and early stage investment can thrive under this new Government.
One thing is clear is that Sunak will be using public spending and an additional £100bn infrastructure spending over the next 5 years to drive forward the economy, which has been flatlining.
A key issue that we will continue to press with the Government and Chancellor Sunak will be the maintenance of a tax environment that encourages and leverages private investment in entrepreneurs and ensures that the UK maintains its role as a leading ecosystem for stimulating entrepreneurial growth and investment. We have asked the Chancellor to ensure that the EIS and SEIS tax reliefs are secured for the foreseeable future. We have also supported the importance of Entrepreneur’s Relief in encouraging entrepreneurship here in the UK and, whilst some reforms may be necessary, this scheme should be regarded as fundamental in supporting the opportunity for successful founders to recycle a portion of their capital gains into the next generation of entrepreneurs. We have also asked for strong consideration to be given to maintaining the Enterprise Management Incentive (EMI) scheme. This enables start-ups and early stage businesses to compete and attract the highly-skilled talent they need and who might otherwise seek higher salaries at leading corporates and tech giants by enabling investee businesses backed by angels to build and retain their teams at a lower cost.
We need to ensure that Chancellor Sunak, whilst focusing on his massive infrastructure spending plan to level up the regional economies, also recognises the importance of building effective entrepreneurial finance ecosystems in these underserved regions. The latest British Business Bank Small Business Finance Markets Report for 2019-20 launched today (Thursday 27th February) reveals the ongoing challenges for us to ensure that we can redress the balance of access to finance for regional entrepreneurs. Notably the report reveals that 66% of all equity investment and 47% of all deals is focused on London. Whilst 53% of all investments made using the EIS and SEIS scheme is also made in London entrepreneurs, whilst the report’s research had revealed that there was significant lack of awareness among entrepreneurs in these underserved regions about equity investing and specifically angel investment or the EIS/SEIS schemes.
What is particularly significant in this report are the indicators of a slow down in early stage entrepreneurial activity here in the UK and especially in these regions outside the Golden Triangle with a key factor being the low density of available equity investment sources and notably angel investors. This is a major challenge for UKBAA and for us all to build angel investment capacity and to attract angel investment and VC funds from outside the regions as co-investors. It is too early to assess the impact of the new British Business Investment’s £100m Regional Angels Programme offering co-investment funds to stimulate more local angel investment in the regions but we look forward to more of these funding pots being announced in the coming months. We also look forward to the release of the results of the recent Angel Market carried out by the British Business Bank in partnership with UKBAA to provide us with more detailed evidence on the current status of angel investing and the report will be launched on 1st April In Leeds.
Finally, 8th March is International Women’s Day and with a number of events happening next week, we will be sending out some specific messages about the importance of backing women founded businesses and notably the importance of encouraging more women angel investors- so do look out next week for our list of leading women angel investors across the UK nominated by our community. Meanwhile do check out the many valuable events being organised by our community in the week ahead.