By Daniel Hunter
Businesses raised £611million through the Enterprise Investment Scheme (EIS) in the year to March 31 2010 (latest data available), up 18% from £516 million the year before, according to Rockpool Investments, the new tax efficient private equity investment firm.
According to Rockpool, this means that £8.2 billion has been invested in businesses through EIS since the incentive was first made available in 1993. Rockpool explains that nearly 18,000 businesses have now been helped by EIS investments.
“The Enterprise Investment Scheme saw a surge in interest following a sudden decline in 2008 — 09. The financial crisis obviously had an impact on investment across the board and EIS investments were no exception, but now investor appetite for investing in smaller companies is recovering,” Gary Robins, Managing Partner of Rockpool, said.
“As soon as the worst of the financial crisis subsided, investors returned to EIS investments in droves. The Enterprise Investment Scheme is one of the most successful schemes for getting equity investment into smaller businesses.”
Rockpool predicts that the amount of money invested through EIS will continue to increase following changes to the EIS rules, which:
· allow investors to shelter more money in the scheme
· radically expand the size of company that can be invested in through EIS
“Even before the radical shake-up of the rules, investor demand for EIS investments was consistently high. Now that the scheme is even more attractive, demand is likely to rocket,” Robins added.
“The new rules broaden the appeal of EIS investment as bigger companies, which are considered more stable, are now eligible. It takes a lot of knowledge to invest effectively in very small businesses, but the changes to EIS allow investors to invest in more mature companies and that is likely to encourage more people to use the scheme.”
“Managed, EIS-eligible investments like those offered by Rockpool are also becoming an extremely popular way for investors to pick up some tax efficient exposure to SMEs in their portfolio.”
Rockpool explains that the Enterprise Investment Scheme was originally set up to help encourage more investment in small to medium sized businesses.
“Investing through EIS gives investors the opportunity to make returns on their money, whilst at the same time helping ambitious companies to grow faster,” Robins said.
“SMEs are the lifeblood of the UK’s economy and the key to future growth, but it has become notoriously difficult for them to obtain affordable debt from traditional sources to fund their growth. That means they are more likely to look for equity investment, meaning that investors can pick and choose from a range of possible business investments.”
“Companies like Rockpool will support the UK’s SME sector whilst at the same time providing investors with ready access to top quality, highly tax-efficient private equity opportunities.”
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