Over two-thirds (68%) of intermediaries believe the economic recovery has made smaller businesses an attractive investment opportunity, according to new research from Albion Ventures.
The research shows adviser optimism for smaller businesses is shared by their clients: almost a third (31%) of IFAs has reported an increased number of enquiries over the past year from clients looking for investment opportunities in smaller, entrepreneurial businesses and 37% said they had received more client interest in opportunities to invest in firms that are well placed to capitalise on the stronger performing UK economy.
The contribution of UK SMEs to the economy as a whole cannot be underestimated. The European Commission’s SME Performance Review estimates that Gross Value Add of SMEs is EUR531 billion or 51% of the UK economy and that the sector has also added more than 700,000 jobs since 20103.
As investor interest in backing small UK businesses grows, on average IFAs believe this will have a positive impact on the VCT market – on average they predict the sector will attract over GBP475 million this tax year, up from GBP435.8 million during the 2013/14 tax year.
According to Albion’s study, almost half (49%) of advisers believe that clients who have previously invested in small-cap funds or smaller businesses are likely to have a more sophisticated understanding of this sector and re-invest. However over a third (35%) don’t believe this is a significant factor.
Patrick Reeve, Managing Partner at Albion Ventures, says: “This is an exciting time for young UK businesses with ambitions to grow. With favourable economic tailwinds and a supportive investor community small firms have a tremendous window of opportunity to make a mark.
“Given this backdrop it’s no surprise that VCTs are attracting high levels of investor interest this tax season. As the tax year-end approaches we’re seeing strong inflows from a wide range of investors both those who are new to the sector as well as seasoned participants. However, a common factor shared by all our investors is a commitment to deploying their capital to support talented British entrepreneurs.”
