EIS investments fall sharply despite tax breaks, raising concerns over regional imbalance and complexity

Investor appetite for backing high-growth private companies through the UK’s flagship Enterprise Investment Scheme (EIS) has dropped significantly, with new HMRC figures showing a 20% fall in funds raised in the year to March 2024.

Companies secured just £1.6 billion through EIS last year, down from £2.0 billion the previous year and well below the post-pandemic peak of £2.3 billion in 2022. The number of companies benefiting also declined by 10% to 3,780.

Despite generous tax breaks, including income tax and capital gains tax relief for qualifying investors, the EIS appears to have been hit by caution among investors during a year characterised by economic headwinds and interest rate uncertainty.

In contrast, the sister Seed Enterprise Investment Scheme (SEIS) — designed for earlier-stage startups — saw a 25% surge in company participation, with 2,290 businesses raising a combined £242 million. The increase followed rule changes in April 2023 that raised maximum investment thresholds, offering greater flexibility and attracting more early-stage investors.

Across both schemes, the majority of investment continues to be concentrated in London and the South East, with around two-thirds of recipient companies headquartered in the region — prompting calls for greater regional diversification.