Pressure is growing to use the UK’s departure from the EU as an opportunity to build on the success of the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs).

A recent article in City AM by Nick King, head of business at the Centre for Policy Studies thinktank, called on the government and the FCA to use the power of EIS and VCTs to support the development of the UK as a global ‘fintech hub’, and Brexit could prove to be the opportunity to do just that. 

King is the author of Herding Unicorns, a report published by the Centre for Policy Studies and supported by UK tech firm Deliveroo, which, among other things, calls on the government to reconsider how State Aid rules limiting EIS and VCT investments could be “loosened” to drive more money into the fintech world.

As he writes in City AM: “Implementing these sorts of ideas is crucial if the UK is to remain a global fintech hub. It does, however, require much more support for fintech from both the Treasury and fintech’s regulator, the Financial Conduct Authority (FCA).”

Interestingly, it seems the powers that be are taking note of the need to support fintech and the last week has seen some notable developments in this area.

FCA chief executive Andrew Bailey’s speech at the Lord Mayor’s Banquet in London, for example, highlighted the importance of fintech and suggested the regulator is aware of the need to look after this area of development. “We should not take the location of our Fintech sector for granted – hubris is never a good thing,” he said. “But if we understand what supports it and has led to it developing, we stand a better chance of nurturing it.”

Added to this is the appointment of Mel Stride as the new chair of the Commons Treasury Select Committee. Stride is a former Financial Secretary to the Treasury – a position he held during the government’s review of EIS and VCTs that resulted in the risk to capital requirement being introduced. So he is someone who knows a thing or two about this area and about the government’s desire to support smaller, riskier businesses to grow and thrive.

As a result, it might be expected that Stride will be well-placed in his new role to maintain pressure on the government to make the most of VCTs and EIS to support British businesses, particularly as Brexit looms. Together with Bailey’s focus on innovative fields such as fintech, there could be a powerful combination of forces arrayed at the Treasury. 

Brexit is likely to only build that pressure. As we have found in our upcoming EIS Report 2019/20, the imperative to boost small businesses after the UK leaves the EU is almost certain to be at the top of the government’s agenda – whatever party or parties are in power. Furthermore, the potential ability to diverge from EU rules around issues such as State Aid could significantly increase the flexibility that the government has to use EIS and VCTs as the levers to create that growth.