Investments into enterprise investment schemes and seed enterprise investment schemes soared last year, marking the highest amount raised since the schemes were introduced.
In the 2021-22 tax year, 4,480 companies raised £2.3bn under the EIS scheme, a 39 per cent increase in funding on the year before.
Of this, 1,755 were new companies, which raised £584mn.
Seed enterprise investment schemes, which are limited to companies with under 25 employees and £350,000 in net assets, raised £205mn, a 16 per cent increase on the previous year.
Some 1,815 companies raised funds under the SEIS last year for the first time, representing £179mn of investment.
EIS and SEIS provide income tax relief for investors who commit their capital for a number of years. Investors also qualify for some capital gains tax reliefs.
Alex Davies, chief executive of Wealth Club, said the figures show that investing in early-stage businesses is becoming “increasingly mainstream” for wealthier and more sophisticated investors.
“This is great news for the British economy,” he added.
“Start-ups and scale-ups create a disproportionate amount of jobs and economic growth, and record investment into them could help us out of our current economic malaise.”
However, he said that the fundraising climate was much harder in the 2022-23 tax year, so it is unlikely that these figures will be matched next year.
“This government and future governments need to refrain from tinkering. The main reason people are funding all these start-ups is tax relief. Mess with it, reduce it and they won’t.”
A survey earlier this year showed that financial advisers make use of EIS more than venture capital trusts (VCTs).
Some 11 per cent of IFAs said they use EIS exclusively, with 2 per cent saying they just used VCTs.
Nearly a third (31 per cent) use EIS and VCTs equally, with a further 26 per cent using EIS predominantly but investing through VCTs ‘when appropriate’.
Some 82 per cent of advisers said the speed of deployment of capital is a very important factor when selecting an EIS manager.
sally.hickey@ft.com
