Small business investment schemes need more exposure, says IoD

More people are using investment schemes like SEIS and EIS to invest in small businesses, but there is potential for further growth.

A growing number of small and medium-size enterprises are taking advantage of government schemes designed to make it easier to attract investors, but there is still a lot of untapped potential that firms are missing out on.

This is according to the Institute of Directors (IoD), which was commenting on the release of new government figures showing a rise in investment during the 2013-14 financial year.

Data from the Office for National Statistics shows more than £1.5 billion was invested using the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) during the 12-month period.

The two initiatives are designed to make it easier for investors to back new and growing firms and over 2,700 companies benefited from the contributions of over 2,700 people during 2013-14.

Deputy director of policy at the IoD Jimmy McLoughlin said the "rapid growth" in use of EIS and SEIS "shows they have the potential to unlock billions of pounds in business investment".

He said there is "no reason" why the 100,000 people that invested using the scheme cannot be increased "ten times", adding that there is particular room for growth in the SEIS, which was introduced in 2012 and through which companies only raised £150 million in 2013-14.

SEIS was launched with the aim of supporting companies that are just getting off the ground, by offering tax relief for investment at a higher rate. It complements EIS, which began in 1994 and also offers tax relief, at a lower rate, to investors why buy shares in small trading companies.

Mr McLoughlin urged the government to "play its part" in making investing in a business as easy as possible, noting the procedure is time-consuming and difficult for many people. He argued there needs to be better promotion of the two schemes and they need to be made as simple as possible to invest through".

Awareness of the initiatives seems to be lacking within the government itself, as, according to Business Zone, a report from the Entrepreneurs' Network showed a third of Conservative MPs are not aware of SEIS.