Posted on Sep 18, 2011 by Sandy Finlayson |
I do not recall which politician first referred to “the green shoots of recovery”.However, it is abundantly clear to all informed commentators that any recovery will start in the enterprise economy which is seriously constrained by lack of support from the banking sector.
There is a gradual dawning of realisation that “you cannot finance an equity risk with debt” and the key to recovery is the provision of equity to high growth companies with the potential both to create new employment and to provide export sales.
The enhancements to the tax relief for the Enterprise Investment Scheme (EIS) in the budget are leading to significant new interest from early stage investors and over the past few months we have been involved in establishing three new Business Angel syndicates in London.While we are only scratching the surface I hope that this may represent the gradual dawning of realisation by investors that “primary” investment in worthwhile new businesses which are driving innovation, creating employment and have real potential for wealth creation is infinitely more worthwhile than trading bits of second hand paper in the aftermarket.
The Government continues to be supportive and the Treasury recently published a consultation document about further improvements to the EIS scheme - www.hm-treasury.gov.uk. For anyone with an interest in regulation (!) a copy of our response is attached.
The Treasury has recognised that there is still a real problem with very early stage investment and we may look forward to a new relief (“BASIS”) offering enhanced relief for pre-revenue start-up companies.This will be a very welcome development as it is now more difficult than ever to raise money for start-up companies.
The Treasury consultation closes at the end of this month and everyone who is interested in this area of activity should be encouraged to review the consultation document and make representations to the Treasury.The consultation document is well considered and it is clear that the Treasury would like to be as helpful as it can within current funding constraints.
The European Commission recently carried out a similar consultation aiming to improve pan-European investment for early stage companies.However, despite the four fundamental freedoms (capital, labour, goods and services) there are still astonishing regulatory barriers in the way of cross-border investment.However, the regulators have still got to get to grips with “crowd funding” and the regulators are finding it very hard to keep up with the reality of life on the internet and any change to the regulations mist recognise the current reality.
The Government has also been acting as well as listening. I recently attended a very impressive presentation by the Business Growth Fund. It really is the “son of 3i”, it has £2.5 Billion of commitments and is open for business. The Scottish Loan Fund which is a Scottish Government initiative - Scottish Enterprise is also actively looking for new investment. These are valuable Government initiatives. Anyone seeking to grow their business should think about strengthening their balance sheet and managing financial risk and should certainly be considering if the Business Growth Fund or the Scottish Loan Fund might be right for their business.