Following the announcement from the Office for National Statistics that the UK’s unemployment rose to 5.1% in the three months to December – the highest the rate has been in five years – Business Leader spoke to Ian Warwick, Managing Partner at Deepbridge Capital on the correlation between unemployment rising to 5.1% but average weekly earnings rising 4.7%.
The unemployment data undoubtedly does not reflect the full economic picture for the UK as the Government furlough scheme continues to protect those business most affected by the pandemic.
However, the 4.7% rise in average weekly earnings adds another straw to the proverbial camel’s back for investors, as a long period of low-interest rates combined with depressed spending as a result of lockdowns, has resulted in a scenario where many consumers have accumulated a comparatively high level of savings in a low-return environment.
Many are therefore sitting on cash piles that are not appreciating in value while there are growth-focused early-stage companies, that will be the backbone of economic recovery, requiring funding.
As a result, there is an inherent opportunity for investors and their advisers to provide long-term support for growth-focused companies whilst gaining access to a portfolio of long-term growth investment opportunities, and potential tax reliefs available, via the likes of the Enterprise Investment Scheme.
The types of companies we support, being innovative technology and life sciences companies, are by their very nature expected to be highly innovative and are therefore are generally focussed on addressing long-term market needs.
As we witnessed last year, we believe there should continue to be a genuine need for the research, development and/or products such companies are producing.
Of course, the life sciences sector has perhaps never seen greater focus and there continues to be great UK innovations in this space. The biggest problem for growing early-stage companies may be access to funding, but we expect UK investors and financial advisers to continue to utilise the Enterprise Investment Scheme (EIS) to support such great companies whilst allowing investors to benefit from the generous potential tax reliefs on offer.
EIS has never been a more important Government tool for supporting the UK economy and it has never been more vital for investors to understand the potential benefits.