The Government’s £500 million Future Fund opened for applications officially on 21st May, with innovative and high-growth British businesses able to secure investment to help them through the Coronavirus outbreak. UK-based companies can now apply for a convertible loan of between £125,000 and £5 million, to support continued growth and innovation in sectors as diverse as technology, life sciences and the creative industries.
The Government has made an initial £250 million available for investment through the scheme and will consider increasing this if needed. Private investors – potentially including venture capital funds, angel investors and those backed by regional funds – will at least match the Government investment in these companies.
This fund is a great step in the right direction for the Government to continue to support the UK’s fantastic scale-up community of businesses. The fund is an opportunity for small firms to scale and grow during this crisis and become part of the backbone of the economy for years to come. The fund is not, however, currently compliant with the Enterprise Investment Scheme (EIS) which may make it difficult for many private investors to support it. We would hope to see the fund extended to include EIS investments.
Extending the Future Fund to include EIS investments will open up the scheme to a whole new sector of investors and private capital; from angel investors to VCTs. This is not an insignificant amount of money that could be a big boost to companies trying to survive or grow.
The EIS is one of the UK Government’s most successful initiatives in terms of driving investment into high-growth early-stage companies. It has helped produce some incredible business successes that otherwise may not have got off the ground due to the reluctance of banks to lend to these firms. While confidence in investing has undoubtedly reduced, there are still some fantastic opportunities to invest and support the growth of British firms that are expanding and hiring – especially in the MedTech and Pharma arenas.
When the EIS income tax relief was extended from 20% to 30% in 2011, the amount invested in small companies through the scheme saw a tremendous jump. If the Government were to extend the scope or tax efficiencies of the scheme again, it could really help catalyse private investment – a crucial source of growth finance. While any increase in tax reliefs would impact the revenue of the treasury, this would very likely be more than balanced by increased taxes on business revenues and those on new employees – as we have seen previously with the scheme.
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