Startup firms outside of London and the South East are missing out on millions of pounds of investment, according to the latest official figures.
HM Revenue & Customs (HMRC) has extracted key data about Seed Enterprise Investment Scheme (SEIS) startups from tax returns.
The figures show out of the 1,120 companies running under the SEIS banner, 645 (57%) are based in London and the South East.
These companies attracted more than 350 million of investment, which accounts for two-thirds of the cash staked in SEIS during the 2012-13 tax year.
The question is why are so many SEIS startups in the capital and surrounding counties?
Technology hubs
The government and business groups, like the CBI and Federation of Small Businesses argue that Britain has a north/south divide with a two-speed economy that is running faster in and around London than elsewhere.
Indeed, in his Autumn Statement 2014, Chancellor George Osborne set out infrastructure plans to develop a powerhouse northern economy.
The measure is aimed at attracting business and investment to the regions rather than London.
Another reason for the southern bias for SEIS investment is much of the cash is going to technology startups, and these businesses tend to cluster in hubs like Cambridge and the Silicon Roundabout off City Road, in North London.
Tax incentives
Business organisations also suggest entrepreneurs are not so aware of SEIS outside of London, so do not include the option in their planning.
SEIS offers investors in qualifying companies a 50% income tax reduction on an investment of up to £100,000 plus capital gains tax reliefs on the sale of other assets to raise the SEIS cash and the growth of shares bought with the money.
If a SEIS investment fails, investors can also claim loss relief against other income.
| SEIS - Investment by region | ||
|---|---|---|
| Region | Number of startups | Investment (£m) |
| North East | 20 | 0.9 |
| North West | 80 | 5.3 |
| Yorkshire and Humber | 35 | 2.4 |
| East Midlands | 45 | 3.5 |
| West Midlands | 50 | 3.4 |
| South West | 85 | 5.7 |
| East of England | 95 | 7.0 |
| London | 440 | 36.8 |
| South East | 205 | 14.7 |
| Wales | 10 | 0.4 |
| Scotland | 45 | 2.9 |
| Northern Ireland | 10 | 0.5 |
| Total | 1120 | 83.5 |
| Source: HMRC | ||
