Entrepreneurs take the plunge with business start-ups

An army of entrepreneurs are taking up the offer of financial backing from the Seed Enterprise Investment Scheme (SEIS) to start their own businesses.

Not only are more new businesses starting, but the age of entrepreneurs is dropping as more young people set up new companies.

The latest figures from the Barclays Bank Entrepreneur Index takes the pulse of the economy.

The study shows more than 3 million small businesses were active in Britain in the first six months of this year, an increase of just under 4% compared with the same time 12 months ago.

Not only are there more small businesses, but many owners are much younger than those going into business before the credit crunch.

SEIS incentive

More than 7% of entrepreneurs are between 18 and 24 years old, while the average from 2007 until 2010 was between 5.5% and 6.4%.

The research found that a new business culture was instilled in many entrepreneurs that encouraged them to take risks and seek help from government-backed funding like SEIS.

SEIS offers investors staking up to £100,000 in a startup equity generous income tax and capital gains tax breaks.

The three-year SEIS gives investors a 50% income tax reduction and a 50% capital gains tax relief on assets sold to raise cash for the startup investment.

After three years, the equity stake can be sold free of capital gains tax, or if the investment has failed, the investor picks up loss relief against other income.

SEIS means entrepreneurs with businesses that meet the qualifying rules can pitch for finance from business angels and other investors that might otherwise be unavailable.

Change of focus

Businesses have also seen a change of emphasis on the sectors they operate in.

Whereas manufacturing businesses would traditionally sell off small shareholdings to raise cash for retooling and expansion a few years ago, much of the trading activity today is in technology, digital media and pharmaceuticals.

Often these projects are well-managed, special purpose companies spun out of university research.

Richard Phelps, managing director, Barclays Wealth and Investment Management, said: “British businesses are embracing entrepreneurship and taking the plunge as small startups.

“The government has worked hard at pushing this important part of the economy and that effort is paying off as more entrepreneurs decide to try their hand at working for themselves.

“Self-employment is becoming a real option for many as entrepreneurship is firmly becoming an important part of the business psyche.”

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