With the roadmap to recovery, the vaccine rollout and the economy slowly re-opening, there is a newfound sense of optimism in the UK after what has been a torrid 12 months. It is thought that SMEs will be critical to the economic recovery over the coming months and years, so what is the best way to support these businesses?
The last 12 months
First, it is worth reflecting on the year gone by which has been devastating for UK businesses and in more ways than one. In 2020, the UK economy shrank by a record 19.8% in the second quarter and many SMEs struggled to survive even with Government support. Despite this, SMEs returned £18 billion to the UK economy over the course of 2020 through community initiatives like cash donations and volunteering. This is impressive, especially when you consider that 22% of SMEs state that they face significant risk of closure in 2020 which means that now the time they need extra support.
Obviously, one of the best ways to help out small businesses is to choose their services over the larger corporations. Many state that SMEs will be the ones driving the economic recovery and there are new opportunities for success in a post-pandemic marketplace, which means that there are also ways to benefit from this in terms of investing.
Investing in SMEs in 2021 could be an excellent way to support local businesses, help with the economic recovery and make money. There will be many sectors which could flourish over the next year and beyond, including ecommerce, health and fitness and food delivery/mobile food all of which could be worth looking into for anyone looking to invest.
The Enterprise Investment Scheme
For those that like the idea of investing in SMEs, one of the most attractive ways to do this is via the Enterprise Investment Scheme (EIS). The EIS was established by the government in 1994 in a bid to encourage investors to invest in UK startups with the benefit of being able to claim 30% income tax relief on EIS investments up to £1 million.
If your shares are disposed at of a loss, you can get up to 45% loss relief against income or capital gains tax too. There is the potential for substantial returns as you are investing in SMEs at the earliest stage and, as outlined above, 2021 could be a bumper year for small to medium businesses in the UK.
While the effects of the pandemic will be felt for some time in the UK economy, there are now signs of optimism and SMEs could play a major role in the recovery. In addition to supporting small and medium-sized businesses, you could also look to invest which would allow you to support these small businesses and the economy with the potential for substantial returns.
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