UK autumn budget: industry reactions

The changes have been broadly welcomed by trade bodies and fund managers. Prior to the budget, the latter were said to be concerned that the treasury would target VCT and EIS funds by reducing tax relief on such investments.

The UK government notably pledged an additional £2.5bn in funding for BBB in the autumn budget, announced by chancellor of the exchequer Philip Hammond.

The increased investment via BBB follows the government's Patient Capital Review, which has been overseen by a panel chaired by Permira's former chair and managing partner Damon Buffini. In August, the department published a consultation on how to address a £4bn funding shortfall it had identified in the UK growth capital space. The fresh funding is intended, in part, to address a potential loss in funding from the European Investment Fund (EIF) that might follow the country's departure from the European Union.

The treasury has also doubled the maximum amount individuals can invest in EIS schemes from £1m to £2m, as well as doubling to £10m the amount that knowledge-intensive companies – such as university spinouts, technology firms and life sciences companies – can receive in EIS funding in a given year.

Yet there have been changes made to VCT regulation, designed to ensure investment is focused on entrepreneurial high-risk and high-growth businesses, with the government introducing restrictions on capital-preservation-focused products.

However, not all industry professionals were impressed with the budget. One UK fund manager, speaking to unquote" in a personal capacity, said: "The budget reminds me of the forecasts I see from distressed businesses – over optimistic, unachievable and will be revised shortly."

Below is a snapshot of the early responses from private equity professionals:

Tim Hames, director general of the British Private Equity & Venture Capital Association (BVCA):
"Against a challenging and uncertain background, the chancellor has sought to encourage investment in the companies, sectors and industries of the future. Central to this is his response to the Patient Capital Review. The BVCA welcomes this imaginative package and agrees that it could have a transformative impact. We support the additional resources available to the British Business Bank and endorse the increased support offered to the SEIS, EIS and VCT schemes. We would urge ministers to interpret the term 'knowledge-intensive' with appropriate flexibility.

"We look forward to working closely with the government in developing a new long-term strategy for the UK asset-management industry. We also approve of the extra money pledged to research and development, new technologies such as autonomous vehicles and artificial intelligence, and the Transforming Cities Fund."

Keith Morgan, CEO at the British Business Bank:
"The additional finance announced today will allow the British Business Bank to support up to £13bn of long-term patient capital, enabling more smaller businesses to scale up and fully realise their growth ambitions. The expansion of our flagship Enterprise Finance Guarantee programme will also enable us to support up to £2bn of new lending over the next four years. By increasing our funding by two thirds, this budget presents an exciting opportunity for us to strengthen finance markets for ambitious, growing firms across the UK."

Ian Sayers, chief executive of the Association of Investment Companies:
"It's reassuring that private investors will continue to receive the existing tax reliefs on VCT investments. This will help VCTs provide vital scale-up capital for the UK's most innovative and ambitious smaller companies. However, the chancellor has announced significant VCT rule changes and we need to consult with our VCT members, their managers and the government to ensure that they are workable within the commercial reality of funding small businesses. The VCT industry faces significant challenges in complying with these rule changes but the industry has the benefit of highly experienced managers. These managers have adapted to changes in the past and continued to deliver good returns for shareholders."

David Mott, managing partner at Oxford Capital and chairperson of the BVCA Venture Capital Committee:
"The chancellor has presented a Brexit budget for ambitious entrepreneurs. Focusing EIS tax reliefs on tech-focused investments will help to launch thousands of new UK businesses, creating high-value jobs and investing in the R&D that will make the UK a force in the global markets for the years to come. Tech companies can now raise up to £10m a year from EIS and VCT investors, double the current rate. We are all excited about building bigger and stronger businesses.

"Massive investment in the British Business Bank has been expected as we prepare to replace funds that have historically come from the European Investment Bank. The BBB has a vital role in supporting the venture capital sector over the next decade.

David Hall, managing director at YFM Equity Partners:
"We recognise that the government wants to ensure that as much money as possible is invested in the UK's high-growth small businesses, but to do so in a way that achieves value for money. The Venture Capital Trust Association, which represents 75% of the VCT industry and of which YFM is a founding member, has been working with the government to ensure that our investments match their drive for investment in high-risk and innovative businesses – and we will continue to do so. VCTs remain an attractive, tax-efficient investment for investors and a critical source of patient capital for UK SMEs."

Patrick Reeve, managing partner at Albion Capital:
"The measures announced in the budget recognise the valuable contribution VCTs make to the economy. VCT investments have created thousands of UK jobs and transformed small, innovative businesses into household names. The treasury's intention to focus the industry on innovation and growth is welcome. We are highly supportive of innovation and committed to finding and backing more ambitious businesses in areas where we see excellent growth potential, such as digital healthcare, automation, cybersecurity and data analytics."

James Livingston, partner at Foresight Group:
"On balance we welcome the chancellor's recent budget statement. It underlines continued support for EIS and VCT schemes. In particular, the proposed doubling – to £10m – of the amount of investment that knowledge-intensive companies can receive from VCT or EIS investors within a year is to be welcomed as part of the government's action plan to unlock more than £20bn of patient capital. It will be interesting to see how fast the British Business Bank can activate the other initiatives that form the action plan."

Alex van Someren, managing partner at Amadeus Capital Partners:
"Innovation in the UK continues to lead the world in areas such as artificial intelligence, cybersecurity and digital healthcare. The latest budget recognises that supporting UK innovation is one of the best ways we can deliver growth in our economy, which is very welcome given the background of dissatisfaction and uncertainty in so many other things. Amadeus is committed to backing entrepreneurs to win with their deep technology businesses, and it's good to find that the current government is serious about continuing to support us in this work."

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