The UK's small and medium-sized enterprises (SMEs) are falling into £1 billion funding gap, despite £126 billion in untapped private investor finance, according to private equity firm IW Capital.
Investor confidence in private equity investment is high, however, with 63% intending to invest in SMEs in the next five years and over half of UK investors looking to the Enterprise Investment Scheme (EIS) in 2016.
The study found that over a third (34%) of investors with more than £100,000 in investments would invest in the UK’s SMEs but do not have the knowledge to do so – equating to £126 billion in untapped private investment finance. Of those who intend to invest between £100,001 and £250,000, 64% would consider using the EIS.
The lack of awareness is despite the fact that 71% of private investors with over £40,000 worth of investments feel confident in the growth capabilities of UK SMEs and 54% are looking to the Enterprise Investment Scheme (EIS) for the new tax year.
The research from IW Capital reveals that billions in vital development finance is left inactive due to a lack of investor knowledge. This is despite David Cameron’s 2015 pledge to fill a £1bn funding gap that is preventing the growth of UK SMEs, fuelled in part by institutional lending reducing at a rate of £5.7m a day. Osborne’s latest Spring Budget focused heavily on the micro-businesses of Britain’s private sector, but did not do enough to educate high-net-worth individuals as to how they can invest in upscaling SMEs.
Luke Davis, CEO of IW Capital, said: "Despite containing some positive for business, the 2016 Budget failed to adequately address the critical issue of development funding for Britain's upscaling businesses. Our research shows that investors are confident in the growth capabilities of UK SMEs and are considering investment through EIS, but many do not know how to execute these plans. The result is a huge pool of untapped potential investment funds. I was dissapointed at the lack of policy supporting alternative finance, especially in light of its vital contribution to economic recovery."