Note: The contents of this article are the author's opinion and have not been approved as a financial promotion.
We’re calling on the Chancellor to make green infrastructure projects eligible for the Enterprise Investment Scheme (EIS) in the upcoming March Budget.
We believe that opening up EIS to green infrastructure projects again will help towards meeting the UK’s goal of bringing greenhouse gas emissions to net zero by 2050. Investment into these projects would provide SMEs with a much-needed boost in capital and create more jobs, benefitting the overall UK economy.
- Calls for green infrastructure to qualify for EIS investment in upcoming March Budget (Private Equity Wire)
- Sunak urged to allow green infrastructure to qualify for EIS investment (London Loves Business)
- Government urged to modify EIS to promote lending (P2P Finance News)
- Calls for green infrastructure to qualify for EIS investment in upcoming March Budget (Private Equity Insider)
In 2015, the Government decided to ban investments into energy generating activities through EIS, including investment into renewable energy infrastructure. This was designed to encourage investments into higher risk trading companies, which were being overlooked by investors.
With the Government now fast-tracking the ban on sales of new petrol and diesel cars from 2040 to 2030, there are concerns that the switch to electric vehicles is yet to be catered for here in the UK. The supply of electric car charging points will need to be increased, which EIS could help towards funding, if the scheme were opened up again.
There is also scope for EIS to be extended to other sectors that are currently excluded, such as the hotel industry, which has suffered a dramatic fall in profits as a result of lockdown. Reports suggest it could take years until hotels reach pre-Covid levels. By allowing investment into the sector, this could help prevent closures of previously profitable businesses.
Many smaller businesses rely on EIS to attract private investors. The scheme plays an important role in the funding of growing SMEs, attracting £1.8bn in investment in the last year alone. Sectors which currently benefit under the scheme include*:
- 1,225 companies in the tech sector, raising over £540m in 2018/19
- 615 companies in the scientific/research sector, raising £330m in 2018/19
- 500 companies in the manufacturing sector, raising almost £240m in 2018/19
Gary Robins, our Head of Business Development, says:
“In order to meet the Government’s net zero goal, a flow of capital into the UK’s green infrastructure will be key. Broadening the vital EIS funding pipeline to these projects must be part of this.”
“EIS investments have been vital in encouraging growth of early-stage tech businesses in the UK and would also stimulate the expansion of green energy projects. Increasing the number of electric car charging points in the UK is crucial but growth is still too slow. If EIS funding were channelled into that area, it could make a significant difference.”
“It is also worth considering opening EIS to include sectors which have been hard hit by the current pandemic. Sectors like hotels would benefit from much more investment.”
* HMRC, latest available data
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