Not many tax rules deserve a birthday party – but the EIS is an exception
Over the last 30 years the Enterprise Investment Scheme (EIS) has provided £32bn of private investment into 56,000 businesses, says Christiana Stewart-Lockhart
This year marks 30 years of the Enterprise Investment Scheme (EIS), the tax relief that encourages investors to back risky early-stage companies that might – just might – go on to change the world.
It is not often a piece of tax legislation deserves a birthday celebration, but the EIS is an exception. Along with its younger sister, the Seed Enterprise Investment Scheme (SEIS), the EIS has provided £32bn of private investment into 56,000 businesses since 1994.
The two schemes are a significant factor in the UK’s reputation as one of the best places in the world to start a business. Almost half of the unicorns founded in this country, including Revolut, Deliveroo and Zoopla, received EIS funding as they were starting out.
In fact, most people in the UK will go through their daily lives using hundreds of products developed by companies funded through the EIS without even realising it. Whether that’s Kit & Kin’s home and baby products, or takeaway from Just Eat, or second-hand clothes on Depop, or a Monzo account, or alcohol-free beer from Lucky Saint, the list goes on. That’s not to mention some of the life-saving treatments developed by EIS-funded biotechs, finding new ways to treat cancer and diabetes, or the green technology pioneers addressing the climate crisis.
The EIS has enjoyed consistent cross-party support over the past 30 years. Since its creation, successive governments from across the political spectrum have recognised the scheme’s value and continued to champion its cause. There has been some recent positive news, too, with the new Labour government confirming a 10-year extension to the EIS until April 2035. Treasury minister, James Murray MP, explained “Startups and entrepreneurs are a driving force for greater investment, more jobs, and economic growth in the UK. By extending these schemes for 10 years, we are providing the stability and support they need to help us make every part of Britain better off.”
The importance of the EIS cannot be overstated, and not only does it provide tangible support to tens of thousands of ambitious entrepreneurs, but it also plays a key role in innovation, job creation and economic growth. A Beauhurst report published today found that EIS backed companies were responsible for 400,000 jobs across the UK in 2023 alone. The Treasury’s own research highlights the success of the EIS in addressing the early-stage investment gap over the last 30 years and the same research also shows that the combination of tax reliefs, that make up the EIS, are key to its success.
More than 40,000 people invest through the EIS annually – a fraction of those who could access the scheme – and significant work is being done to try and grow awareness of the schemes, particularly amongst women with the UKBAA’s Women backing Women campaign. The now Chancellor, Rt Hon Rachel Reeves MP, has also previously emphasised the importance of the EIS for entrepreneurs and investors and has suggested that Labour would look “to widen access and ensure those tax reliefs work to the greatest effect, spurring innovation and entrepreneurship”.
Starting a business is not easy. About 20 per cent fail in year one and 30 per cent don’t make it to the end of year two. EIS funding is far from guaranteed – you still need a good idea and a strong business plan to convince investors to part with their money – but the scheme does empower entrepreneurs to turn their ideas into a reality because they know a supportive funding environment exists. This is particularly true for female founders, who receive a fraction of the funding from venture capital funds compared to their male counterparts, and the EIS is seen as key to addressing this gap.
Central to the EIS’s success is its role in fostering innovation. By encouraging investment in high-risk, high-reward ventures, the scheme has helped to fuel a culture of entrepreneurship and creativity. This vital injection of capital has enabled many businesses to develop groundbreaking technologies, pioneer new industries, and drive economic growth. It is something we should be very proud of after 30 years.
Christiana Stewart-Lockhart is director general, of the Enterprise Investment Scheme Association (EISA)