Statistics from enterprise investment scheme investment firms Deepbridge Capital and Calculus Capital show a steady increase in the number of advisers using in EIS schemes over the last three years.
For the 12 months up to the end of November, Deepbridge Capital has seen a 102 per cent increase in the number of advisers referring EIS cases to it, along with a 312 per cent increase in the number of advisers expressing interest in referring EIS work this tax year, although most will come through in 2016.
Deepbridge stated that across 2011 to 2012 EIS market growth was at £890m, increasing to £1.1bn across 2012 to 2013 and up to £1.5bn in 2013 to 2014.
Provisional figures for 2014 to 2015 are expected to come through at the end of January, with the firm predicting further growth.
Andrew Aldridge, head of marketing at Deepbridge Capital, suggested this increased interest was attributable to both new advisers looking at the tax-efficient investment sector for the first time and experienced advisers looking at new opportunities.
“The past 18 months has seen some headline-making failures from some of the traditional providers in this sector, which has perhaps led a number of advisers to look at what other opportunities there are in the market, with a particular interest in how managers in this space manage investment risk.”
Calculus Capital backed up the trend by reporting a 42 per cent increase in investors compared to November 2014 and a 43 per cent increase in investment in its EIS funds compared to the same time last year.
It added that the deal flow was up 40 per cent higher year-on-year.
The firm also did research amongst a mixture of wealth management firms, private banks and independent financial advisers, interviewing 18 in total to gauge their views on the EIS sector.
Results showed that 75 per cent of those interviewed stated that EIS was a growing part of their business, with the most common reason being changes to pension cap.
Other key factors included greater acceptance as an asset class and that legislative changes are making EIS more appropriate.
John Glencross, chief executive officer and co-founder of Calculus Capital, explained HM Treasury recently reaffirmed its support for EIS investment by saying small and medium size businesses make a crucial contribution to the UK economy “and that EIS investment meets a critical gap in the market for equity risk capital for these companies”.
Statistics published by HM Revenue and Customs at the end of October this year showed that since EIS’ were launched in 1993 to 1994, just over 22,900 individual companies have received investment through the scheme and over £12.3bn of funds have been raised.
Data for 2013 to 2014 showed that 2,770 companies raised a total of £1.5bn of funds under the EIS scheme. In 2012 to 2013, 2,470 companies raised £1bn of funds.
Andrew Sherlock, partner at Oxford Capital Partners, told FTAdviser that between 2011 and 2014, the number of clients referred to the firm by advisers has doubled each year.
However, while the firm has continued to work with an increasing number of advisers this year, overall growth of the EIS market has slowed, according to Mr Sherlock.
“By April 2016, all forms of EIS that invest in energy will have been phased out. Given that these EIS’ have been a large part of the market in recent years, it seems likely that overall EIS investing may decline next year.
“We and many other providers are still waiting for guidance on the government’s ‘growth and development’ test. This will determine what sort of companies will be able to raise money through EIS, and it is possible that a number of new EIS investment opportunities will arise, plugging the gap left by energy EIS’.”
Ben Smaje, managing director at Kennedy Black Wealth Management, confirmed that EIS and SEIS are being used more and more by advisers, as the government has continued to improve the tax benefits they bring.
“At the same time they’ve gone about restricting tax relief in other areas - most notably pensions - people caught in that are having to look for alternatives.
“Those who would have invested in buy-to-let are being prompted to look for other alternatives. There is a low proportion in EIS/SEIS at the moment, but we are talking to a number of clients actively about this at the moment.”
ruth.gillbe@ft.com
