Paul Wilson, Director and Managing Partner at Clifton Media Lab, the organisation behind GBI Magazine, reflects on the huge uncertainty caused by Trump’s tariffs. In the following article, Paul digs into how the trade mayhem may – or may not – come to impact the nature of tax efficient investing in VCT and EIS schemes here in the UK. Spoiler alert – it’s not all bad news!!!
The UK economy has been facing gentle headwinds since the prospect of a Reeves’ Budget last autumn became a reality following Labour’s landslide election last June.
The reality of that October Budget has been to depress UK economic activity a little. However, one bright spot has been the continuation of VCT and EIS schemes through to 2035, on the same terms in a move which was welcomed widely by the financial services and industry communities alike.
Having raised investment capital of £41 billion for industry since their inception, these conduits to capital have become trusted and dependable sources of capital for companies – as well as useful tools within clients’ overall financial planning strategies.
Does Trump’s trade war threaten the status quo?
‘Liberation’ Day, as it was coined by the US President on the 3rd of April, threw a potential spoke in the world’s economic wheels and therefore potentially reducing confidence in new investment. UK economic growth was expected to reduce by 0.1% a year as a result, a rounding error perhaps, but the markets did not respond well initially with steep drops and much volatility in response to the uncertainty and how it might impact key sectors of the UK economy.
Combined with the practical effect of the UK budget changes to employer NICs hitting businesses the following week, there was much catastrophising which was amplified over the following days as the tariff rates were hiked upwards in a game of global tit for tat.
Whilst global stockmarkets reacted to the uncertainty with drops of up to 10% or more, they have, over weeks, largely recovered much of their pre-liberation day valuations. The received wisdom of the 1930s, that tariffs are a harbinger of recession and seriously impede growth, seems to have been set aside – for now.
The widely dissonant views between commentators, Central Banks and fund managers on what the effects may be are being argued out. Many point to the difference 100 years makes to the global nature of capital and trade. Also the increase in the scope and extent of various taxes make tariffs less of a bogey man to be feared. Others argue that the fundamentals of economics don’t really change that much.
In the fullness of time, whichever side is shown to be right, for now the markets appear to be discounting the tariff war in the hope that things will be resolved before any serious damage is done. The jury remains out, but in the meantime the disparity of views makes commentary on forecasting the outlook for the global economy and for markets even more difficult for advisers than usual.
Immediate exit environment issues
Global M&A deals fell to their lowest level since 2005 in April 2025, with tariffs cited as a key driver of market volatility impacting M&A and IPO plans. For UK startups reliant on EIS and VCT funding, this suggests a tougher environment for exits, reducing the attractiveness of early-stage investments and potentially constraining capital for initial rounds.
It remains to be seen if May sees a more normal flow of M&A and IPO activity. However, it seems reasonable to assume the M&A sector will recover its composure as the stock market indices largely have. With new tax year well underway, there is quite a long runway for the alternative investment industry to land its exits and investments in the current tax year. In that light, it’s possible that the current situation may have no net effect on the tax year as a whole – in terms of fund raising for these powerful investment schemes.
The prospects for VCT & EIS
Free from the fear that an incoming government might cancel or curtail the considerable tax benefits of these highly tax-efficient investment schemes, their extension to 2035 provides businesses with certainty to plan funding rounds. This has been particularly the case in sectors like fintech, cleantech, and digital health, which are typically very popular among EIS and VCT investors. Over 1,000 businesses currently benefit from VCT funding, contributing to job creation and innovation across the UK.
The increases in CGT levels for 25/26 have given these investments an extra financial edge which has also helped investors. The focus is therefore on the effect of confidence in the continued availability of overseas markets and competitiveness in those markets. Because of the particular sectors which investee companies focus on, the effect is likely to be minimal on them directly so the only remaining downside appears to be general market sentiment and ongoing uncertainty depressing investment.
Emerging events, theatricals or substance?
The volatility of the current global political and economic situation was further underlined by the surprise and rushed announcement of a UK/US trade deal in early May. Although badged as being comprehensive, it seems limited and symbolic in nature. Perhaps as the tariff war will prove to be? The trade deal impact is quite small as set out so far however as further deals and compromises are reached with the other leading economies of the world, it will become more apparent whether we will ultimately end up with increased – or indeed reduced – international trade barriers.
Trump’s ‘Art of the deal’ seems to rest on creating mis-direction, noise and confusion. The 90 day pause to so called ‘reciprocal’ tariffs announced, nods to the signalling rather than substantive nature of US negotiating tactics thus far. It is reassuring that markets seem able to parse out the reality of the situation given a few days to digest matters.
For the longer term, it seems likely that a compromise will be reached between the US and the rest of the world in terms of trade and life should hopefully continue relatively unaffected. Overall, nothing significant appears to have changed for either VCT or EIS schemes. Both remain attractive tax planning investment vehicles for advisers and their clients which can harness the growth potential of dynamic businesses operating across the UK.
Written by Paul Wilson, Director and Managing Partner at Clifton Media Lab
About Paul Wilson
Paul is a Director and Managing Partner at Clifton Media Lab, the organisation which sits behind GBI Magazine, as well as its sister titles IFA Magazine and WealthDFM.
Paul is a serial entrepreneur, who has built and sold a regional IFA business and an M&A business, as well as founding and successfully disposing of businesses in other sectors such as advanced materials, construction and development.
Within the advice sector, Paul has worked as an adviser, progressing via compliance and, unusually, also via sales management to the senior management of a large national advice firm before co-founding a regional IFA firm. On disposal of that, he assisted in the founding of IFA Magazine, later taking that over.
His personal interests are in film, in which he completed an MA ten years ago, as well as art, photography, economics and science.
