The European Union’s investment arm, the European Investment Fund (EIF) appears to have completely shut down funding to UK-based start-ups. This comes after the release of a report which showed that in 2017, there was a 91 per cent drop on 2016 investment.
The amount the EIF has invested in UK businesses has been falling since Article 50 was triggered last year, and in 2017 this figure fell to £53 million.
This is a large loss, as the EIF’s funds accounted for more than a third of investment in aiding UK-based businesses between 2011 and 2015, with more than £2 billion invested in various funds.
However, according to a spokesman for the Fund, the EIF has not formally stopped investment in the UK. However, he added that the organisation has become “more thorough” when it comes to due diligence checks and when doing this, it has been taking into account “a wider range of factors”.
Chancellor Philip Hammond has said that he is prepared to give more power to the British Business Bank (BBB) in the event that the EIF stops backing UK investors permanently.
Towards the end of last year, Mr Hammond promised that the BBB fund would be seeded with £2.5 billion of public money. Moreover, he promised that pension fund regulations would become more flexible and permit pensioners to use their funds to help UK start-up businesses grow.
In addition, the Chancellor also promised to double how much individuals can invest through the tax-efficient Enterprise Investment Scheme (EIS).
The amount which such companies can receive from EIS and Venture Capital Trust (VCT) investments will also be doubled, which should altogether unlock over £7 billion of growth investment.
Jon Stocker, a General Practice Partner at Milsted Langdon who specialises in advising start-ups, said: “Start-up businesses need to pay close attention to any changes to funding announced by the BBB, the Chancellor or the Government.
“There are a great number of fantastic funding opportunities available to start-ups and these opportunities are always changing and improving – so it really pays to keep on top of the latest advancements.
We have experience helping clients raise funding through EIS and Seed EIS and are able to assist in preparing the appropriate reports. Milsted Langdon Financial Services can also advise clients considering EIS investments and the great opportunities for tax saving that exist.”
For more information about how Milsted Langdon can help start-ups, please contact us.