Finance · 15 December 2017

Angel investment increases more than 40 per cent in one year in Britain

Young man with drawn wings flying in sky
Just 26 per cent of angel investors invested less in 2016 than in the year before

UK angel investment is on the rise, with 41 per cent of the country’s angels investing 41 per cent more in 2016 than in 2015.

However, the UK’s regional equity gap persists, with London businesses experiencing far greater levels of equity investment compared with other parts of the country.

New research from the British Business Bank (BBB) and the UK Business Angels Association (UKBAA) revealed that just 26 per cent of Britain’s angel investors invested less last year than in 2015.

Overall, angel investors reported strong investment portfolio growth, both in terms of turnover and employment.

On average, angel investors reported 75 per cent of their current portfolio had experienced turnover growth in the last year, while 80 per cent had experienced employment growth.

Angel investors are highly concentrated in London and the South East of England, the research showed, with a high proportion also choosing to put government tax schemes to use.

Some 87 per cent of angel investors in a survey said they’d used either the Enterprise Investment Scheme (EIS) or the Seed Enterprise Investment Scheme (SEIS) for at least one investment in 2016.

The UKBAA’s CEO, Jenny Tooth, welcomed the increase in UK angel investment that the research highlighted. She said: “Angel investment is a vital source of finance for early stage businesses and it is very encouraging that this latest research shows that angels have invested even more in small businesses in 2016 than the previous year.”

Unlike other forms of small business investment, angel investment tends to come on an ad hoc basis from individuals, including the friends and family of startup founders, at the earliest stages of a firm’s growth.

In his Budget announcement last month, the chancellor acknowledged the rise of angel investment in the UK with several financial concessions.

Extra funding of £2.5bn was introduced to help support £13bn of long-term “patient” capital for small business growth. The chancellor also called for the greater development of clusters of angel investors outside London and the South East.

Chief executive at the BBB, Keith Morgan, said that the development bank would continue to support angel investors. “We are working on plans to support business angels across the UK and ensure smaller businesses can access the finance they need to grow and succeed, wherever they are in the country,” he said.

“In the regions, we are already responsible for funds supporting £650m of finance for the Northern Powerhouse and Midlands Engine areas, and will shortly be launching a similar fund for Cornwall and Isles of Scilly.”

Tooth went on to say: “There remains a considerable challenge for entrepreneurs to access this source of investment outside the ‘Golden triangle’ – and so we are pleased that the BBB has been given this new mandate to leverage further angel investment in the regions.”

Read more: Prudent entrepreneurs too risky for 87 per cent of UK angel investors

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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