Backing British Business: Reflecting on 30 Years of the Enterprise Investment Scheme

It’s been 30 years since the launch of the Enterprise Investment Scheme (EIS). Along with its younger sibling, the Seed Enterprise Investment Scheme (SEIS), this programme was designed to foster private investment in higher-risk ventures, supporting British entrepreneurs and driving economic growth.

EIS and SEIS have had a remarkable impact on fledgling businesses and their ability to access capital. For context, in the 2021/22 tax year alone, 4,480 companies raised a total of ￡2.3 billion under EIS.

But in the aftermath of Brexit, the pandemic and the subsequent cost-of-living crisis, a lack of private investment in early-stage businesses has become a pertinent issue. This, in turn, calls into question whether these schemes have evolved alongside the needs of Britain’s scaling businesses – at the very least, it suggests that we should be considering what more could be done through EIS and SEIS to support the interests of investors and entrepreneurs alike.

Reinvigorating EIS

Despite the Chancellor’s efforts to reinvigorate British business investment through initiatives such as the Mansion House Reforms, the lacklustre levels of capital for growing enterprises remains a stymying factor for the UK economy.?

The EIS and SEIS could be significant weapons in the Government’s armoury when attempting to tackle this issue. Their ongoing popularity underscores the attractiveness of tax-incentivising investment, but what more can we do to increase participation?

For one, we need to consider how many people are aware of EIS and what the initiative entails. After all, while the higher risk of eligible businesses might seem off-putting, the tax incentives of EIS investment – including income tax relief, tax-exempt profits, and loss relief – can assuage those worries.

The challenge is increasing awareness of the EIS scheme and further encouraging new investors through reforms such as widening eligibility criteria or adding new tax incentives.?

Further, demand-side reforms such as built-in mechanisms for businesses to report investments to HMRC on behalf of their investors would democratise consumer access and make the scheme more appealing.?

EIS/SEIS could be supporting British business better, but this would require action, and perhaps a degree of risk-taking.

Policymakers have a duty to level up these schemes to make British business investment more accessible and appealing, giving the startup ecosystem a much-needed shot in the arm.

The old adage of ‘if it ain’t broke, don’t fix it’ simply won’t suffice; now feels an opportune moment to put EIS and SEIS under the microscope and consider how we can evolve both schemes.?