Bure Valley Group is an investment introducer platform which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.
The UK has arguably suffered from a lot of neglect by global investors since the 2008-9 Financial Crisis. However, looking “under the bonnet” of the UK economy in 2024, there are many compelling reasons for investors to consider British businesses.
Below, our team at Bure Valley Group explains why corporate investment has been historically weak over the last decade, why things might be looking up and the possible implications for portfolio planning. We hope these insights are useful to you.
To learn more about our EIS projects and other early-stage opportunities, visit our portfolio page. For enquiries regarding our latest projects and funding, you can reach us via:
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Understanding Britain’s investment problem
For many years now, the UK has suffered from problems which have held back investment. These include high regulatory burdens, high unit labour costs (e.g. a rising Minimum Wage), high energy costs and high costs for rental and housing. Poor transport infrastructure in many parts of the country has not helped either.
Some investors may (understandably) assume that the UK’s main problem has been a lack of funding. However, evidence suggests that the primary factors seem to be wider uncertainty (e.g. instability since the 2016 Brexit vote) and widespread expectations of low future growth.
Happily, the winds of change may finally be blowing in 2024.
The UK’s appeal
In his 2023 Autumn statement, the Chancellor confirmed a ten-year extension to the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) until 2035. The government has also announced the planned introduction of a “British ISA”, which could extend an individual’s normal £20,000 ISA allowance by £5,000 per year.
This reinforces the UK’s reputation as one of the “best places” in the world to do business (according to the World Bank). Indeed, our nation was recently ranked 6th due to metrics such as enforcing contracts, cross-border training and paying taxes.
Indeed, VCT investing is showing strong signs of growth. In 2022-23, fundraising for VCTs surpassed £1bn for the second time, at £1.08bn. The UK is still widely seen as a very tax-efficient place to invest in startups, with schemes such as EIS offering 30% up-front Income Tax Relief on the value of qualifying investments up to £1m per year.
The implications of the election
What about the general election? Could a change in government lead to a reduction in tax benefits for early-stage investors in the UK? At present, the campaign is still underway and manifestos are still being developed. However, the early signs are encouraging.
Historically, the first-past-the-post electoral system in the UK has delivered a two-party contest (barring the unusual 2010-15 coalition). Labour are widely expected to win this time, although nothing is certain. At present, the party has pledged to retain permanent full expensing and the Annual Investment Allowance.
Whoever wins power, it would be very unwise to pursue policies that undermine the UK’s comparative advantage in key areas such as finance, business and professional services. To continue our tradition of service exports and avoid a huge current account deficit, the next government will almost certainly want to retain the UK’s pro-business reputation.
A wide range of options for investors
The UK offers many opportunities for early-stage investors partly due to its various investment “avenues”. These bestow great flexibility to investors who want to build tax-efficient portfolios, yet arriving with different investment goals, needs and asset allocations.
For instance, SEIS is available for those particularly interested in the smallest startup opportunities. In 2023-24, an investor can claim 50% up-front Income Tax Relief on up to £200,000 of SEIS investments (per tax year). Shares held for at least three years are exempt from capital gains tax (CGT), and loss relief if an SEIS investment is sold at a loss.
Others many be more drawn to opportunities in the Alternative Investment Market (AIM). Many of these unquoted companies qualify for Business Relief, thus offering potential inheritance tax (IHT) savings when an investor is building their estate plan.
VCTs may be particularly attractive to investors who are mainly looking to draw an income from their investments. The annual allowance for VCTs is £200,000, with no reduction for high earners. Dividends received from VCTs are free and do not need declaring on a tax return.
Finally, EIS offers a great range of tax-efficient investment options for those who are looking for companie which are still “early-stage”, but a bit further along their growth journey. In 2023-24, EIS allows investors to defer CGT from other non-EIS assets if the profits are re-invested into EIS-qualifying investments. Shares held for at least two years are free from IHT, and future losses on EIS shares can be offset against Income Tax.
Invitation
Overall, the UK is a fantastic place to not only set up a startup, but also to invest in one. Investors still need to weigh the risks of investing in early-stage companies, which are more prone to failure than larger ones with a proven track record. However, the above schemes can mitigate many of the risks involved, alongside other timeless investment practices (e.g. diversification and due diligence).
Interested in finding out more about the exciting startup projects we have on offer to investors here at Bure Valley Group? Get in touch today to start a conversation with our team and discuss some of the great investment memorandums we have available here:
+44 160 334 0827
