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The Chancellor’s Future Fund for start-up businesses is a brilliant move but needs backing from private investors

The Chancellor’s £1bn package for start-up businesses is another brilliant move to support the UK’s business infrastructure during the COVID-19 crisis, but it will need backing from private investors if it is going to work, says Nimesh Shah.

It is a welcome measure from the Government and acknowledges that the start-up community is a key part of the UK’s business eco-system, but there are immediate limitations and possible frustrations to getting the cash into these start-up businesses.

For a business to qualify, it would have had to have raised £250,000 from third party investors over the last five years. This will immediately exclude some pure start-ups and fledgling businesses who haven’t had such investment.

Where the business is eligible, the Future Fund will match any investment made by private investors. It therefore needs private investors to commit before the Future Fund pays out.

Raising investment is one of the biggest issues for start-up businesses, even during normal times, and it is going to be naturally more challenging to convince private investors given the present situation.

Today’s announcements do not go into the specific details of the scheme and whether there are any incentives for private investors to participate, say in the form of tax relief for making an investment or downside protection.

I question whether the matched funding design was the right move by the Government.

I question whether the matched funding design was the right move by the Government. A more attractive route for investors could have been a temporary extension to the Enterprise Investment Scheme to provide an enhanced 50% tax relief for a period of one year.

Contact us

If you would like to discuss any of the above or have other queries about how you can make the right decisions for the future of your business and your income, please contact your usual Blick Rothenberg contact or Nimesh Shah.

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