The good news for those raising money for their start up and early stage companies is that the amount of capital on which EIS Relief has been obtained has bounced back from a low of under £600 Million in 2010/2011 to just over £1 Billion in 2011/2012 according to the latest statistics compiled by the Office of National Statistics - http://www.hmrc.gov.uk/statistics/enterprise/eis-commentary.pdf.
Contrary to widespread belief, only about £200 Million went into high tech with the bulk of the investment going into more traditional industries.
50% of the total went to investments above £1 Million with 40% going to investments between £1.75 Million and £2 Million although 43% of all companies receiving investment obtained £100,000 or less.
What is staggering however, is the geographical distribution of EIS relief across the UK. No less than 74% of the total went into London and the South East and Scotland, which prides itself on the extent of its Business Angel activity, only received 3% of the total.
London and the South East enjoy a vibrant booming economy because of the number of people starting and building new businesses. One of the reasons they are able to do so is because they have access to capital, much of it provided by EIS investors.
However, there is a vast amount of private wealth in the regions. If we wish our regional economies to flourish, it is clear that we must encourage the deployment of much more private capital into the growth businesses which will provide the employment opportunities of tomorrow.
The Government has done everything it can with EIS relief by creating the most generous tax incentives available anywhere in the mainstream tax-paying world to facilitate investment in SMEs. It is now up to us to take advantage of the Government’s generosity if we wish to create graduate level employment opportunities for the next generation.
As the real value of savings is eroded by inflation, there has surely never been a better time for those with capital to invest to consider EIS investment.