UKBAA welcomes the Chancellor’s Budget
UKBAA welcomes the Chancellor announcement of a new Action Plan to unlock £20bn over 10 years for Financing growth in innovative firms in response to the results of the Patient Capital review, including an enhanced EIS scheme to support innovating businesses. We also welcome the new proposal to support the development of further capacity for angel investing in the regions.
Reflecting the results of the Patient Capital review, the Chancellor announced the intention to enhance the role of EIS and VCTs in supporting Knowledge Based Businesses. This will be done by doubling the annual allowance for people investing in knowledge-intensive companies through the Enterprise Investment Scheme (EIS) from £1m to £2m pa, as well as doubling the annual investment that innovating companies can receive through EIS and the Venture Capital Trust scheme from £5m to £10m.
At the same time, the Government has announced the intention to introduce a new test to reduce the scope for tax evasion and redirect low-risk capital preservation investment. These new measures are thought to have the capacity to unlock over £7 billion of growth investment.
Further key measures under the £20bn plan for financing growth and innovation were focused on
· Establishing a new £2.5 billion Investment Fund incubated in the British Business Bank with the intention to float or sell once it has established a track record. By co-investing with the private sector, a total of £7.5 billion of investment will be unlocked
· Investing in a series of private sector fund of funds of scale: The British Business Bank will seed the first wave of investment with up to £500 million, unlocking double its investment in private capital. Up to three waves will be launched, supporting a total of up to £4 billion investment
· Backing new and emerging fund managers through the British Business Bank’s already established Enterprise Capital Fund programme, unlocking at least £1.5 billion of new investment
· Backing overseas investment in UK venture capital through the Department for International Trade, expected to unlock £1 billion of investment
As part of the Patient Capital review British Business Bank will also be looking to establish a new commercial investment programme to support developing clusters of business angels outside London. This programme will supplement existing programmes operated by BBB to support access to finance outside of London that include the Northern Powerhouse Investment Fund and the Midlands Engine Investment Fund.
In addition, the BBB will evaluate the needs of Women Entrepreneurs to increase their potential to access equity investment including some new behavioural research.
Alongside this, the Budget commits a further £2.3 billion of additional R&D spending in 2021-22, taking total direct R&D spending to £12.5 bn.
The budget also includes a further £21m to expand Tech City UK’s reach across a wider number of regions and to support key tech sector strengths.
New further £1m Games fund to support video game developers is also announced.
Further key measures announced as part of the Action Plan for Financing Growth in innovative firms include:
· giving pension funds confidence that they can invest in assets supporting innovative firms as part of a diverse portfolio. The Pensions Regulator will clarify guidance on investments with long-term investment horizons. With over £2 trillion in UK pension funds, small changes in investment have the potential to transform the supply of capital to innovative firms
· changing the qualifying rules in Entrepreneurs’ Relief to remove the disincentive to accept external investment and consulting on the detailed implementation of that change
· launching a National Security Strategic Investment Fund to invest in advanced technologies to contribute to the national security mission.
The government’s response to the consultation ‘Financing Growth in Innovative Firms’ published alongside Autumn Budget 2017 provides further details of these measures : see https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/661398/Patient_Capital_Review_Consultation_response_web.pdf
Do also join us at the UKBAA National Investment Summit on 28th November to hear more about the Patient Capital Review action plan from Keith Morgan CEO of British Business Bank and join the discussion on reactions to the Chancellors proposals. Book Now while discount tickets remain