A coronavirus survey undertaken by the Enterprise Investment Scheme Association (EISA) of 250 growth businesses currently seeking investment, indicates that more than 9 out of 10 of them will close down within the next 12 months if their current investment plans, disrupted by the coronavirus crisis, fail to materialise.
Covering businesses currently in discussion with investors, with nearly 80% in the £50,000 to £2m bracket, 4 out of 5 reported that the current disruption has impacted their plans either ‘a lot’ or ‘a great deal’, with over 70% saying that they now expect to receive less than 40% of the investment they need to develop their businesses.
Many report that despite having term sheets signed by prospective investors, in the event funds and private investors have walked away.
The EISA is lobbying the Chancellor to increase the tax relief available to private investors for investments in qualifying Seed and Enterprise Investment Scheme businesses to 60%, (from the current 50% for SEIS and 30% for EIS) levels, and to extend the scheme, for the period of the crisis with a view to attracting a further £200m of private investments into the businesses that could well represent the future of the UK’s unicorns.
Mark Brownridge, Director General of the EISA, commented, “Our survey shows very clearly that investors have taken fright at the current coronavirus disruption, which is resulting in many of our fast growth businesses fearing for their future. Of the 250 businesses in the survey over half represent the health, fintech, other tech and software solutions sectors, and these the very businesses that the UK will need as we exit the current crisis. The evidence we have in the survey showing that nearly two thirds believe that relaxing the EIS rules would lead to an increase in equity funding, emphasises that the Government needs to act now, and we strongly encourage them to consider the request we have put to them to provide short term additional reliefs to investors without delay.”