Alan Lorrimer, founder of grassroots live music venues The Piano Works, hospitality sector advisor Payam Keyghobadi and leading leisure lawyer Dave Roberts, with the support of the major hospitality organisations, have written an open letter to Rishi Sunak.
Their proposal asks that the Government considers an initiative which will encourage investors to support bars, restaurants, pubs, clubs and music venues to save countless hospitality businesses and jobs during these uncertain times.
The proposal, from co-signatories Alan, Payam, Dave, Kate Nicholls CEO of UK Hospitality and Michael Kill of the Night Time Industries Association, is to adapt the current EIS and SEIS schemes temporarily, to offer enhanced incentives that will enable hospitality businesses to approach investors for long term risk capital.
This would mean hospitality businesses will have the necessary liquidity to survive and re-open, and investors can reap the rewards once the sector is back on its feet. The Music Venue Trust have also shown their support for the scheme.
The current Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) 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 also allow larger businesses to be eligible for investment.
The EIS scheme has been an amazing success over the past 26 years and has helped raise over £20 billion in investment, creating thousands of jobs and contributing millions of pounds to HMRC in tax revenues. Government figures show that in the three years to April 2019, the EIS and SEIS schemes helped 1,370 companies in the hospitality, arts and entertainment sectors to raise £428million. EIS has existing infrastructure that has been proven to work.
The proposed amendments will ensure that many previously healthy businesses will attract investment, helping operators with mounting government loans, supporting industry employment levels and enabling opportunities for acquisitions and growth, enabling the rebuild of the industry as a whole. Whilst a vaccine is now on the horizon, the hospitality industry still desperately needs help to survive the next few months and be in a position to re-open.
Keyghobadi commented, “Effectively, we are proposing an equity alternative to the CBIL 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.
'Whilst 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.”