16th February 2016

On 8 February, the Institute for Fiscal Studies (IFS) published its annual Green Budget document, highlighting the key economic conditions and trends facing Chancellor Osborne in the lead up to the March 2016 Budget. Taking into account the fiscal targets set by the Conservative Government, the IFS concluded that Osborne would need to introduce tax reform and/or spending cuts to deliver a balanced budget by 2019-2020.

To be formerly introduced as part of the March 2016 Budget, the draft clauses of the Finance Bill 2016 limit the industries and companies able to qualify for tax-efficient investment initiatives such as the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT). While the proposed changes seek to shift capital injections into specific industries, any attempt at further regulatory reform could undermine the long-term growth prospects of small private companies. Therefore, it is paramount that more should be done to promote the scheme and its benefits, in order for the British Government to back SMEs in a cost-effective manner.

Support for SMEs is vital in ensuring a healthy British economy. SMEs are a core enabler of British productivity and innovation, and government policy must continue to cultivate an environment that supports business growth and expansion. EIS and other forms of alternative finance, such as peer-to-peer lending, support this vision by broadening the financial opportunities available to growing businesses. Our CEO, Luke Davis, championed these views in Forbes recently. You can read his full comments here.

Lord Adair Turner, former chairman of the now abolished Financial Services Authority, has criticised the long-term viability of the peer-to-peer lending industry. Overlooking the fundamental significance of the industry in supporting entrepreneurial Britain, Lord Turner attacked peer-to-peer lending for its perceived lack of due diligence and regulatory measures. As would be expected, the industry responded to Lord Turner’s comments, highlighting that the sector is broad, diverse, and has naturally evolved as a consequence of large banks failing to provide small businesses with much needed finance.

The rapid pace and scale in which peer-to-peer lending continues to grow is remarkable. The Government must be up-to-date with the latest industry trends so that any policy reform does not hinder the comparative advantages of peer-to-peer lending as an alternative source of finance. Education and research is key.

The University of Cambridge’s Centre for Alternative Finance (CCAF) recently secured $1 million in funding to further its research in alternative finance. This is a fantastic initiative that will generate greater public awareness, and help identify future challenges and opportunities.

IW Capital will ensure that the significance of alternative finance is championed by continuing to produce research reports, delivering responsive analyses of trends surrounding EIS through to our monthly ‘EIS in 2016’ series.  We look forward to updating you on our new content throughout the year.