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Opening the equity economy

02 Oct 2015
Man tapping area named 'budget' on an interactive wall

How to realise the potential of the Enterprise Investment Scheme and Seed Enterprise Investment Scheme.

Britain is in the midst of an entrepreneurial revolution. Businesses are being started at record pace, more people than ever are working for themselves and new ways of doing business, winning customers, and raising finance are booming. The UK has embraced the digital revolution like no other country on earth, and is home to the most advanced internet economy in the world. Three-quarters of Europe’s alternative finance market is based in the UK, and more and more young people are choosing to start their own business.

Entrepreneurship and investing are on more peoples’ radars than ever before. It is important, therefore, to make sure that the benefits of this disruption, innovation and creativity are spread as far across Britain as possible. It is just as important to ensure that as many people as possible can take part in these exciting new opportunities. If people understand the risks, have spotted a company they like, or just want to diversify their investment portfolio – however large or small – bureaucratic barriers should not stand in their way.

The Government has made much of its plans to devolve power to the nations and regions of the United Kingdom, and businesses are excited about the prospect of having a bigger say on local decision making. A review is also being conducted, led by Michelle Mone OBE, into how to make sure the entrepreneurial revolution does not leave poor or disadvantaged communities behind. The Institute of Directors supports both these initiatives. If the UK is to lead not only Europe, but the world, then the entrepreneurial fever must be spread far, wide, and more evenly.

Although new businesses in Britain have a more open attitude towards financing expansion through equity, rather than debt, we still lag the world leaders, North America, when it comes to our equity infrastructure. The UK’s biggest weakness, on various measures of entrepreneurship (see next page), is on our attitude to risk capital. This report will outline how Britain can capitalise on two vital but underutilised government initiatives, the Enterprise Investment Scheme (EIS) and its younger sibling, the Seed Enterprise Investment Scheme (SEIS), to unlock a wave of new investors, build up equity finance in the UK and cement its position as one of the best places in the world to start, set-up, run and invest in a business.

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