Venture Capital Trusts could drive much needed investment into UK businesses, experts have said in response to the chancellor’s Mansion House speech.
Rachel Reeves said the government wanted to see regulatory red tape cut to boost domestic investment in her speech to City bosses on Tuesday night (July 15).
Mark Cunningham, partner at audit, tax and business advisory firm Blick Rothenberg, said reforms of the Enterprise Investment Scheme and VCTs could be useful tools for encouraging investment in early stage companies.
He said: “Most of the retail investment drive is focused towards larger, listed companies. That’s understandable given the risk appetite of everyday investors, but it means that the investment is unlikely to flow into smaller businesses that are driving growth across the UK.
“Crucially, Rachel Reeves made no mention of reforms to the Enterprise Investment Scheme, Seed EIS or Venture Capital Trusts, all of which are important tools for encouraging higher risk, early-stage investment.
“This appears to be a missed opportunity. Updating these schemes, by raising company and investor caps, relaxing sector restrictions (such as including property development in some form), and improving liquidity could go a long way towards bringing in more funding for growth focused SMEs.”
Richard Stone, chief executive of the Association of Investment Companies, said streamlining the VCT rules would help the trusts support more companies.
He said: “The intention to create an ambitious package of reform for venture capital is important.
“Venture capital trusts (VCTs) have a track record of funding small businesses that struggle to raise development capital from traditional sources.
“Streamlining VCT rules will empower VCTs to support a wider range of innovative, entrepreneurial companies with ambition to grow, create new products and generate jobs.
“The AIC has put forward proposals to achieve this without additional cost to the Exchequer and I urge the chancellor to take these forward in her next financial statement.”
On Monday (July 14) the Venture Capital Trust Association published a policy paper urging the Treasury to make two changes to the VCT scheme.
It said increasing the investment limits and extending the age limits would come at no cost to the government, a call backed by the AIC.
Chris Lewis, VCTA chair, said: “VCTs have consistently proven their value by backing the UK’s most ambitious entrepreneurs.
“We have a proven model that delivers results, but the scheme must evolve to keep pace with the scale of the opportunity and challenges facing today’s start-ups and entrepreneurs.
“These reforms will unlock capital for the UK’s most promising businesses, in the sectors and regions that will define the UK’s economic future, ensuring that the benefits of their success are felt here at home.”
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