EU will create single market for VCTs to aid SME funding

The European Commission is looking to create a single market for venture capital trusts across the European Union.

The Single Market Act, which was adopted by the European Commission last week, includes proposals to improve access to funding for over 20 million small and medium-sized enterprises.

The EC says: “The aim is to put in place common rules for venture capital funds enabling those established in one member state to invest in any other member state, thus providing SMEs with funding and necessary expertise at an attractive price.”

UK-based VCTs are already allowed to invest in overseas companies and gained state aid approval from the EC in 2009, allowing them to continue benefiting from tax breaks when investing in the EU.

However, the conditions placed on the UK differ from other member states.

Albion Ventures managing partner Patrick Reeve says: “The French equivalent of VCTs have far fewer restrictions and the way that government-suppor-ted funds are treated around the EU differs. Some logic here would be helpful.

“For example, in France, funds can invest in firms with fewer than 250 employers.

“The UK Government is currently pushing for our limit of 50 employers to be brought in line with France, so any moves to a level playing field here are welcome.”

The EU will bring forward details on 50 proposals aimed at reinforcing the single market later this year, to be in force by the end of 2012.

Bridgewater Financial Services director Christopher Wicks says: “Opening up opportunities for investment is always welcome but people might still feel more comfortable investing in small UK firms because it would mean not taking on risks that they would find very difficult to appraise.”