Happy 30th birthday to the enterprise investment scheme

A government-backed funding scheme for ambitious companies, including almost half those to be valued at more than $1 billion, celebrates its 30th anniversary this week.
The Enterprise Investment Scheme was launched in 1994 to help to tackle the shortage of capital available to entrepreneurs trying to build high-risk companies.
John Major’s government provided generous income and capital gains tax relief to investors as a reward for risking their money by acquiring ordinary shares in start-ups. The businesses had to meet strict criteria on their size, activity and how long they took to invest the money raised.
The scheme has been amended many times since. Investors can now stake up to £1 million in trading companies, and £2 million in research-focused technology firms.
It remains an important tool for entrepreneurs seeking to develop their businesses, according to Christiana Stewart-Lockhart, director-general of the Enterprise Investment Scheme Association. “These are schemes that countries across the world are trying to copy. They attract talent to the UK and are a big part of why the UK is one of the best places to start a business,” she said.
About £29.9 billion of EIS investment has been raised by 37,445 businesses, including consumer brands such as Pip & Nut peanut butter and Deliveroo, Revolut and Zoopla, all three of which achieved so-called unicorn status, a valuation of more than $1 billion. In total, 1,280 companies used the scheme in the year to March 2023, up from 75 companies in 1994.
Its merit has already been recognised by the Labour government, which this month confirmed the extension of the tax reliefs available under the scheme for another ten years to April 2035. James Murray, exchequer secretary to the Treasury, said the extension provided “the stability and support” that start-ups needed. The scheme had been due to end next April, a deadline that was causing concern among companies planning to raise capital and with institutional investors that raise EIS-compatible funds.
With the Treasury examining all tax reliefs in the run-up to the autumn budget statement on October 30, Stewart-Lockhart warned against changes to the scheme. “The key thing is that these schemes continue as they are because they have been shown to be so effective.”