Brexit marks shift in risk appetite of UK investors

With the triggering of Article 50 and the start of the 2017/18 financial year on 6 April, London-based investment firm IW Capital has conducted new research to profile the risk appetite of the UK investor community.

Based on an independent, nationally-representative survey of 1,000 Brits who have between £10,000 and over £250,000 worth of investments – not including properties or pensions – IW Capital found that investors are embracing the full potential of investment opportunities that lie ahead as a consequence of Brexit.

The study uncovered that the equivalent of 2.21 million investors in the UK said they are entering the new financial year with a greater risk appetite and seeking fresh investment angles.

Despite concerns that investors would be more risk averse as a consequence of Brexit, the research also found that 44 per cent of investors see Brexit as having a positive impact on their financial strategy in the year ahead, with a further 22 per cent foreseeing no notable effects.

With the Bank of England recently upgrading its 2017 growth forecasts for the British economy from 1.4 per cent to 2 per cent, investors have recognised the investment potential on offer in the country’s private sector. The research found that 13 per cent of investors – equivalent to 3.19 million Britons – feel the biggest investment opportunity this year is private equity investment into UK businesses. This number rises to 17 per cent for millennials and 23 per cent for Londoners.

When considering the industries supporting productivity and growth, IW Capital’s research revealed that 27 per cent of investors (over 6 million people) consider innovation and technological advancements to be the two greatest strengths propelling the UK economy forward.

The role of private investment in supporting the nation’s digital economy is vital; a report by Tech Nation found that the UK secured £6.8 billion in venture capital and private equity digital tech investment in 2016 – over 50 per cent more than any other European country. Worth an estimated £100 billion, the digital economy is one of many industries British investors are confident in supporting in the new financial year.

IW Capital’s study also revealed that investors are gravitating towards tax-efficient investment schemes – initiatives that offer tax breaks in return for investment into the private sector. The research found 1.47 million investors will be using tax-efficient investment schemes such as the Enterprise Investment Scheme (EIS) in 2017/18. However, one in four investors hope more will be done to support investor interest by way of programmes such as EIS. This number rises to 33 per cent for investors aged 55 and over.

Luke Davis, CEO of IW Capital, said: “The performance of the UK economy since the EU referendum has been extremely impressive, driven in no small part by our country’s diverse collection of SMEs that account for 99.9 per cent of all private companies. This research demonstrates that the continuing growth of the private sector is attracting the interest of the nation’s investors, who are clearly embracing the future of Brand Britain and the undiscovered investment potential that lies ahead.

“With investors increasingly looking to tax-efficient investment schemes as a means of investing into the private sector in the new tax year, it is important the Government considers new reforms to ensure these schemes are both accessible to investors and targeting scaling businesses most in need of growth capital. Importantly, Brexit frees the UK from European state aid regulations, and the Government should use this as an opportunity to expand initiatives such as EIS that has previously been limited by EU policies.”