Piano Works founder proposes Enterprise Investment Scheme adaptation to help rebuild hospitality
Alan Lorrimer, founder of live music venue brand the Piano Works (pictured), is spearheading a proposed adaptation to the Enterprise Investment Scheme that will incentivise investors to help rebuild the hospitality sector.
An open letter is calling on chancellor Rishi Sunak to temporarily adapt the Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS) to offer enhanced incentives that will enable hospitality businesses to approach investors for long-term risk capital.
The letter has been signed by Lorrimer, hospitality sector advisor Payam Keyghobadi and leisure lawyer Dave Roberts, as well as UKHospitality chief executive Kate Nicholls and Michael Kill of the Night Time Industries Association.
It said the changes could mean hospitality businesses have the necessary liquidity to survive and reopen, and investors can reap the rewards once the sector is back on its feet.
The current schemes offer tax-efficient benefits to investors in return for investment into business, designed to boost economic growth in the UK by promoting enterprise and entrepreneurship.
Income tax relief at the point of investment would be increased to 75% in the new proposed scheme, offset by the removal of loss relief. It also recommends the age of businesses be reviewed from the current seven-year limit and would allow larger businesses to be eligible for investment.
The EIS scheme has helped raise more than £20b in investment over the last 26 years, and government figures show that in the three years to April 2019, both schemes helped 1,370 companies in the hospitality, arts and entertainment sectors to raise £428m.
The proposed amendments could help many previously healthy businesses attract investment, helping operators with mounting government loans, supporting industry employment levels and enabling opportunities for acquisitions and growth.
Keyghobadi, partner at Dow Schofield Watts, said: "Effectively, we are proposing an equity alternative to the CBIL (Coronavirus Business Interruption Loan) scheme. Debt cannot be the only answer in the current circumstances. The pandemic has meant that many previously robust and well-funded businesses have seen their very viability jeopardised. We are extremely concerned that some excellent operations and operators will be forced out of the sector and may not return."
Lorrimer said: "Since March there has been no light at the end of the Covid tunnel, at last we have something to look forward to. We urge the government to allow these changes to the EIS scheme and help rebuild the hospitality industry, which has been devastated and has left so many of our young people out of work.
"While the government's financial support has been needed and much appreciated, the level of debt is not sustainable. Currently the sector's balance sheets are over-leveraged with CBILS loans enabling operators to survive, but there are many at risk of liquidation. The amendments to this scheme, will help the hospitality industry help itself and replace government debt with equity.
"We know the public will come flocking back to the venues they love so much as soon as they are able, and we want as many businesses as possible to still be around for the next roaring twenties."
