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Breakfast at Number 10: Part 1 – Encouraging investment

‘Angels, your country needs you!’

Well it wasn’t ‘Breakfast at Tiffany’s’ although there was plenty of silver on display. I was invited to a business summit for angels and entrepreneurs at Number 10 Downing Street on Friday.  I suspect that my inclusion on the guest list resulted from interest in Qi3 Accelerator’s new model for investment in High Value Manufacturing businesses.

David Cameron spoke about his drive to make the UK a great place for companies to attract investment and grow. Like Kitchener, he exhorted us with the words ‘Angels, your country needs you!’ Having just climbed the famous staircase featuring portraits of all 73 of Britain’s Prime Ministers, it was clear that this was a place in which such a statement should be taken seriously.

He went on to highlight the tax incentives for investors introduced over the past 2 years:

  • increased the rate of income tax relief for the Enterprise Investment Scheme (EIS) to 30 per cent to encourage more equity investment in start-ups;
  • doubled the investor limits to £1 million per year from this April;
  • launched the new Seed Enterprise Investment Scheme (SEIS), which provides 50 per cent rate of income tax relief for individuals who invest in new early stage businesses; and
  • from April, for one year only, to kick start the scheme there will be a capital gains tax holiday, so gains can be re-invested into start-ups and be exempted from capital gains tax.

Whilst I’m not yet fully convinced by the details of SEIS, there’s no doubt that a 50% income tax and 28% capital gains tax relief makes for an extraordinarily generous attempt to kick-start seed investment at the £150k level.  I shall certainly be looking for an Accelerate to Investment seed opportunity right now.

There were numerous questions from the floor about the details of the EIS tax relief. This is a superb scheme, but definitely requires simplification and specific extension to enable investor directors to benefit from EIS-able share options.

Lord Young in his talk emphasised that now is a great time to start up and grow businesses. I heartily agree with this perspective.  Whilst others are locked in corporate stasis and gloom, it’s the time for up and coming businesses to defy recession and go for growth.

Other speakers introduced the Angel CoFund, Business Coaching for Growth programme and the Business Growth Fund, which is aimed at growing businesses that have already reached £5m annual revenues.

Of course the real-life war stories from Giles Palmer (Brandwatch) and Dale Murray (BBAA Angel of the Year 2011) brought humour and reality to the morning. I especially noted Dale’s remarks on a ‘bad angel’ who had sought to seize control of her business.  The event was attended by several MPs and ministers including David Willetts (Universities & Science) and David Gauke (Treasury).

Whilst the event tried to cram an awfully big subject into a 3 hour session, the politicians impressed me with their openness and willingness to listen. They repeatedly encouraged direct input to Lord Young’s programme.  It was evident that the newly launched Angel CoFund, the Business Growth Fund and the new Seed Enterprise Investment Scheme are all direct outcomes of input from the British Business Angels Association and other bodies.  Anthony Clarke at LBA/BBAA has clearly maximised the lobbying power of this community, amongst a bewildering array of angelic acronyms and organisations.  Somehow, even Angela Knight, the voice of the British Banker’s Association (BBA), seemed to think that banks have something to offer through mentoring, if not money.

Even more important was the understanding that finance and tax incentives are necessary but not sufficient to kick start this part of the economy.  Companies need to be able to access the skills and support of experienced businesspeople and specialist mentors if they are to be able to recognise and achieve their full potential.

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