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New figures released by HMRC have revealed a 39% year-on-year increase in EIS funding in 2021/22, with total investment through the scheme reaching a record high of £2.3bn.
The scheme, which brings together private investors with companies that need funds to scale up operations, supported 4,480 companies in the year, a 19% increase on 2020/21.
Money invested through the Seed Enterprise Investment Scheme (SEIS), which invests in earlier stage start-ups, rose by 16%, increasing to a record £205m spread across 2,270 companies. Of these, 80% were raising money for the first time and companies registered in London and the Southeast accounted for 67% of all the SEIS investment.
The number of investors claiming EIS relief rose by 15.7% to 45,155, while 9,950 investors claimed SEIS relief, up 4.8%. Across both EIS and SEIS, over half of investors invested less than £10,000.
Alex Davies, CEO and founder of Wealth Club, said: “2021/22 was a record year for EIS and SEIS investment and shows that investing in early-stage businesses is becoming increasingly mainstream for wealthier and more sophisticated investors, attracted by generous tax incentives and the potential to invest in the next big thing.
“This is great news for the British economy. Start-ups and scale-ups create a disproportionate amount of jobs and economic growth, and record investment into them could help us out of our current economic malaise.”
He added: “That said, we shouldn’t be resting on our laurels. These figures are one year behind, and the fundraising climate was much harder in 2022/23 so it’s unlikely these figures will be matched next year.
“Arguably today, the EIS and SEIS schemes make Britain one of the best places to set up a business. This government and future governments need to refrain from tinkering. The main reason people are funding all these start-ups is tax relief. Mess with it, reduce it and they won’t.”
