It is clear that Brexit is not a positive for UK business in general and more specifically definitely not good for early and growth stage companies in the innovation economy. Core to efficient running of the technology economy is early and growth stage funding, an area where the UK has developed a rich ecosystem of funding options running from extensive angel networks through crowd funding to early and growth stage venture capital. However, unlike the more developed venture market in the US, the UK still requires significant government support to lubricate the system. Individual investors are motivated to invest in higher risk/return assets through the very popular SEIS/EIS tax relief scheme. Currently the UK government is restricted by EU regulations on State Aid but Brexit has created the opportunity for them to be more creative on the rules around EIS since. In this year’s Autumn budget they took the first steps in this process by doubling the allowance for qualifying investments for both individuals and companies in the knowledge intensive sector.

The other Brexit challenge was a clear indication that the European Investment Fund (EIF) would not continue to provide support to UK based funds. Venture funds often use EIF or Enterprise Capital Funds as a cornerstone investor and would probably not be able to raise capital without this support. Again in this years budget, the government follow up on its consultation on patient capital with an action plan to grow the supply of patient capital in the UK. Details are given in the budget brief and full consultation response where they outline a significant program to replace the contribution made by the EIF. Providing the British Business Bank, who operates the ECF scheme and will be the custodian of the new program, is pragmatic we should escape the worst of Brexit on the funding side. Life will still be more complex for companies looking to operate across Europe.