So how has the EIS done this year?

Numbers-wise, it’s still a bit early to say, as we are not due to receive the first estimates of EIS funds raised from HMRC for at least another month.

What we do know is that it’s been a year of huge change in the EIS, following the introduction of the new rules just over a year ago. The main impact of the rule changes was to re-focus the EIS on growth, and away from low risk/low return structures. From what we hear, the providers who were already focussed on growth funds appear to have maintained their level of investment fairly much unchanged year on year.

The industry sector which has been the big loser is media. Media represented a major portion of the overall EIS market in recent years, but the new rules have made it impossible for media projects in EIS companies to borrow against pre-sales and government tax credits, effectively “guaranteeing” 70% of investment returned. Three months ago, a well-known major media provider withdrew all its media offers from the market, equivalent to some £200 million of investment, leaving a very big hole to be filled.

The sector which is shaping up to fill the gap appears to be technology. The leading technology fund manager of recent years has maintained its market dominance, but has been joined by at least one high profile market entrant. At the other end of the scale, there have been a number of new smaller entrants to the EIS market, mainly generalist funds focussing on growth. If there is an overall theme this year, it is Technology Growth.

But other sectors appear to have retained their popularity, in particular Leisure & Hospitality. The sector has suffered a bit in the last two years, due to the recession in the casual dining market, but the signs are it is roaring back, driven by new trends like “experiential”, which seems to have replaced competitive socialising as the latest craze.

We read that London is the Unicorn capital of Europe and is tipped to overtake San Francisco in the next few years to become ‘Unicorn capital of the world’. It’s probably no co-incidence that with the EIS, the UK also has the leading tax incentive structure. 25 years old this year, the EIS has to date raised over £18 billion for 27,000 companies. We at EISA (the EIS Association) are celebrating this major achievement with a big birthday party on 20 June.

And we should spare a thought for the SEIS. Since its introduction in 2012-13, SEIS has consistently represented 10% of the total EIS market. This year, with the rule changes affecting the EIS but not the SEIS, I think it may have increased its market share – watch this space.

So how have investors and advisers adapted to all the changes? I would say it’s a mixed picture. I have been surprised at the speed with which some major investment firms have got behind the new rules and successfully converted their clients from low-risk structures to the new higher risk growth schemes. Some, however, appear not yet to have embraced the new status quo and one wonders if they will, or whether they have simply exited the market.