By Andrew Aldridge, Partner at Deepbridge Capital
The UK Government’s current tag line of ‘Building Back Better’ is focused on the realisation that we can live in a smarter way. It also suggests that the UK has the opportunity to be at the forefront of twenty-first century sustainable innovation.
The Government has repeatedly trumpeted three key sectors whose success will enable us as a nation to achieve these lofty goals. The sectors of digital innovation, healthcare advancement and sustainable energy production, are rightly these areas of focus.
Importantly for advisers, this national focus enables them to identify the investment opportunities and sectors where investors could, and probably should, be focusing. This is particularly important when considering venture capital and private equity holdings, such as tax efficient investments.
As an organisation that has spent the past decade, and more, championing these sectors, it is of course good to see real political force now being employed to grow these areas, about which we are so passionate.
The UK has a long and proud history of technological innovation and there is no suggestion that this will change. The challenge is how best to harness this innovative thinking and not only having good ideas but also then creating the best tech companies and the highly skilled jobs of tomorrow. Digital and tech solutions to real world challenges will enable us, and future generations, to live more efficiently and, if developed correctly, hopefully address significant social challenges.
Equally, the healthcare and bio life science sector has long been at the forefront of advancement and progress, with vaccinations just being one fantastic recent example of this. Pandemics aside, we have ageing and longer-living populations around the globe, representing the success of healthcare advancements whilst also creating new health and social care challenges. Unfortunately, just throwing money at healthcare service providers will not solve these challenges alone. It will be the innovators, the pioneers and the critical thinkers that will ultimately find solutions.
Government rhetoric and tag lines alone will not inspire and empower these sectors to achieve. Investment and patient capital is required to support the individuals and companies driving these changes. This is exactly where the Enterprise Investment Scheme (EIS) comes in. This long-standing tool to encourage early-stage investment has never been more important. Investors wanting growth should be considering EIS opportunities as part of their well-diversified portfolio, not just for the generous tax reliefs available but also to be exposed to assets at the very heart of the vision for a twenty-first century United Kingdom. EIS investments are higher risk and not for everyone, but increased awareness and appetite continue to see new investors entering the market. It still amazes us that some IFAs dismiss EIS opportunities out of hand. Historically, this may have been due to lack of education or understanding but with plenty of training now available, including Deepbridge’s own webinar series which recently awarded the Spirit of EIS Award at our trade body’s (EISA) annual awards, that can no longer be an excuse.
Away from EIS, the third pillar of ‘Building Back Better’ is the renewable energy sector. Although not EIS qualifying, we continue to support this sector with Business Relief qualifying opportunities.
The renewable energy sector has arguably never been a ‘hotter’ investment sector with the international drive towards ‘Net Zero’ targets. By 2050, about half of global energy production is expected to come from renewable sources such as wind and solar power, according to the US Energy Information Administration.
Discussions surrounding this were recently accelerated at the COP26 conference in Glasgow, an annual conference where 200 world leaders and more than 20,000 delegates met to facilitate a united response to the climate crisis. Encouragingly, a key focus emerged on companies and investors to step up to the plate and mobilise finance for decarbonisation and the net-zero transition. The move to such a world requires significant long-term investment in renewable energy sources and the sector is now at the forefront of technological development, as providers seek to increase production efficiency and identify new ways to harness natural resources. Opportunities to support renewable energy development projects have never been more plentiful.
Why is this knowledge important for advisers? Crucially, if an adviser isn’t offering opportunities in these ‘on trend’ sectors, then it is probable that investors will go elsewhere. Over recent years we have witnessed the rise in crowdfunding and alternative investment platforms, with investors increasingly having a hybrid approach to financial advice. Therefore, if an adviser wants to ensure their best clients are seeking their advice across their entire portfolio, then he or she needs to have access to the sectors which are on trend, because direct to consumer platforms sure as hell do.