Funding falls back from record high in 2022/23, but still better than the wider venture market

23/05/2024

NEW figures released by HRMC today show a 15% year-on-year fall in EIS funding in 2022/23, with total investment through the scheme of £2.0 billion – down from a record £2.3 billion the previous year. The scheme, which brings together private investors with companies that need funds to scale up operations, supported 4,205 companies in the year, a 5.6% fall on 2021/22.

Money invested through the Seed Enterprise Investment Scheme (SEIS), which invests in earlier stage start-ups, fell 24% to £157 million, spread across 1,815 companies. Of these, 79% were raising money for the first time and companies registered in London and the Southeast accounted for 67% of companies receiving SEIS investment.

However, data shows that the wider European Venture Capital sector showed a 45% fall between 2022 and 2023– which suggests the tax advantaged schemes continue to provide vital support to UK companies when market conditions are difficult.

Since the Enterprise Investment Scheme launched in 1994, 37,445 individual companies have received investment and around £29.9 billion of funds have been raised in total. 18,800 companies have raised £1.9 billion under SEIS since its launch in 2012/13.

The number of investors claiming EIS relief in 2022/23 via self-assessment fell 9.7% to 40,485, while 8,065 investors claimed SEIS relief, down 18.5%. Across both EIS and SEIS, over half of investors invested less than £10,000.

Alex Davies, CEO and founder of Wealth Club, comments:

“The figures from HMRC are always more than a year behind. We expect figures for the most recent tax year to be perhaps even more subdued.

But whilst 2022/23 saw a decline in the amount invested into British start ups through the generous EIS and SEIS scheme, it is not all bad news. The amounts raised held up well compared with the total amounts invested in venture across Europe, and was still the fourth highest amount raised on record under EIS.

This is good news for British businesses. Despite all the economic uncertainty over the last couple of years, people are still willing to invest large amounts into UK start ups. And those doing so in a much more deflated market could end up seeing good returns.

That said we suspect conditions are building for the next EIS boom. Interest rates look like they are on the way down which makes investing in start ups more attractive. Moreover, there is a general election on the way. Both parties talk about prioritising growth, but, whatever they say, both will end up either keeping taxes high or putting them up further, making investing in start ups through the EIS and SEIS schemes relatively more attractive.

This is great news for the British economy. Start-ups and scale-ups create a disproportionate amount of jobs and economic growth, and record investment into them could help us climb out of the current economic downturn.”

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