The Autumn Statement: What it means for the Angel & Early Stage Investment Community

The Chancellor’s Autumn Statement today in which he detailed the results of his spending reviews contained a number of elements of interest to the angel and early stage community.

Notably, in relation to Venture Capital Schemes, George Osborne announced that the Enterprise Investment Scheme (EIS), Venture Capital Trusts (VCT) and Seed Enterprise Investment Scheme (SEIS) that the provision of reserve energy generating capacity and the generation of renewable energy benefiting from other government support by community energy organisations will no longer be qualifying activities. In addition, these activities will not be eligible for Social Investment Tax Relief (SITR) when SITR is enlarged. (This to take effect from 30 November 2015). The government will exclude all remaining energy generation activities from the schemes from 6 April 2016, as well as from the enlarged SITR.

It was also announced that The government will introduce increased flexibility for replacement capital within EIS and VCT, subject to State aid approval which is a reversal of the approach announced earlier in the year.

The Chancellor reaffirmed his commitment to maintaining a vibrant private sector and to supporting small businesses, who he described as the lifeblood of the economy, emphasising the importance of supporting innovation. This included the announcement of increased spending on the Catapult centres around the UK which have offered an important bridge between innovation, research and industry, as well as some important new Centres of Excellence.

At the same time, Osborne announced that as part of his efficiency review, up to £165m per year of the current grants offered by Innovate UK to enable entrepreneurs to test and commercialise their innovations, will now be offered as loans. This change of funding model could have considerable impact on the opportunities for many of these innovating businesses to access investment from angel and early stage funds, since investors have to date been keen to co-invest alongside these grants, but may be less keen to support loans.

The Chancellor reiterated his support for the growth of the regions and devolution. In relation to the Northern Powerhouse, in addition to announcing major transport and infrastructure projects, he announced that the Government had agreed with the British Business Bank and the LEPs in the North west, Yorkshire and Humber to create a new Northern Powerhouse Investment Fund of over £400m to invest in small businesses, subject to EU funding arrangements, together with a further £100m for the North East. It will be interesting to know what the plans are for this fund and how far it will support CoInvestment alongside Angel investment.

By UKBAA 26 Nov 2015