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Chancellor urged to reverse ‘damaging’ angel investment policy

angel investment policy threshold
Image credit: photocosmos1 / Shutterstock

Chancellor Jeremy Hunt has been urged to reconsider upcoming changes to angel investor thresholds over concerns that “female and underrepresented founders will be hit hardest”.

In an open letter signed by the Startup Coalition, the Entrepreneurs Network and the UK Business Angels Association, among others, the chancellor was urged to reverse the upcoming change to the definition of a High Net Worth Individual Investor.

The government recently announced a policy to increase the income threshold to define high net-worth individuals from £100,000 to £170,000. This would cut off investment protections under the Financial Promotion Order for thousands of angel investors.

The changes aim to increase protections for investors amid a rise in the use of retail investment platforms. Exemption rules for high-net-worth individuals have not been updated since 2005.

Since then, there “have been significant economic, social and technological changes to the context in which the exemptions operate”, the Treasury said in a consultation document.

The open letter described the rule change, currently due to take effect from 31 January, as “anathema to the trailblazing startup ecosystem that has been built today” and said it would be “damaging the ecosystem at such a delicate time”.

The tech ecosystem representatives warned that not only would startups suffer due to reductions in the amount of capital available, but the change would also disproportionately impact women and other underrepresented groups in the investment community.

“Underrepresented founders already have a harder time accessing capital,” the letter said. “As female-led angel groups and others have warned, the changes will squeeze out more women and ethnic minority angels.”

The letter added that angel investing “risks becoming an elite-only activity, undoing huge amounts of good work”.

“We want investing to be as diverse and open as possible. Technology such as crowdfunding and angel syndicates platforms have enabled the democratisation of the startup ecosystem.

“The changes risk reverting angel investing to an elite-only activity, leaving people ostracised from the growth of the UK’s tech sector.”

Concern over how the rule change would cut women off from angel investment opportunities was highlighted by entrepreneur Grace Beverly, who last week pointed to the lack of women compared with men worth more than £100,000, particularly outside of London.

Speaking to UKTN, Kristina Pereckaite, managing director at South East Angels, said: “If it’s highlighting anything it’s that women have less money to invest. That’s the real issue. Who we call a HNW isn’t going to change that.”

UKTN has reached out to the Treasury for comment.

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