This letter has been organised by Lodestone Communications

Rt Hon Jeremy Hunt MP
House of Commons
London
SW1A 0AA

Dear Chancellor,

As you’ll be aware, from January 31st, despite our concerns being raised, a law came into force making it harder for all women to become angel investors than it ever has been. Alongside increases to the net asset threshold, the income threshold increased from £100,000 to £170,000. As you would expect, the number of people who could qualify as angel investors will now decline dramatically.

However, in every region and nation, that decline is far greater for women due to the pay inequality that exists. HMG has this data. Thus, the impact of HM Treasury’s changes will disproportionately impact the number of women who are eligible for angel investing in comparison to the number of men who qualify.

Of the 15.66 million women working in the UK, only 76,500 (0.0048%) would meet the new threshold. The impact for women of colour is especially stark and it is these diverse angel investors who overwhelmingly fund diverse founders.

We are now going to see a huge reduction in the number of women able to invest in start-ups on the basis of income, unless this law is reversed. This impact is estimated as a 70% fall throughout the UK and a 90-100% fall in some regions - down to zero in Northern Ireland and the North East of England. These new rules will have an extreme and disproportionate dampening effect on the ability of female entrepreneurs to raise capital to start and grow their businesses. Female investors are twice as likely to back female-led start-ups as male investors. The new threshold will prevent women from investing in women and further entrench the gender inequity that blights British enterprise from the Board level to the factory floor.

A report published by the British Business Bank revealed last year that despite some progress, diversity in venture capital investment remains extremely low and identified clear pathways to enhance diversity in venture capital. Women, people from ethnic minorities, and those from lower socio-economic backgrounds (proxied by education) are significantly less likely to receive venture capital investment compared to their male or white counterparts, or those that went to ‘elite’ universities.

These new rules will lead to an investment environment that is even less diverse from cultural, ethnicity, gender and geography than it is currently. The British Business Bank report highlights that to increase diversity of people who receive venture capital, you need a diverse pool of investors. Businesses with all-female founders received only 2% of venture capital funding in 2021, while only 0.14% went to black women-led businesses between 2013-2021.

The UK cannot be expected to innovate for the future when its funding models are stuck in the past. £250 billion could be added to the UK economy if as many women in the UK started and scaled businesses as men - this is only possible with the support of more female investors.

The HM Treasury have in fact commissioned a report, Investing in Minority Ethnic Entrepreneurs which rightly said: “Entrepreneurs in every part of the UK should have an equal chance to realise their ambitions, whatever their background”. The Rose Review, commissioned by HM Treasury, also called for the UK to “grow the pool of women angels from 14% to 30% by 2030.”. Signs of this have been seen, showing that 16-25 year old women founded nearly 17,500 business in 2022, 22 times greater than in 2018 – we shouldn’t be stemming this positive growth now.

We support the work now being done by the Start Up Coalition to highlight the issue more generally and we urge you to reverse the threshold in the upcoming Budget before it is too late. We are calling on the Government to back initiatives that will help all women both as investors and entrepreneurs flourish, rather than flounder. Now is not the time to put in place such barriers to growth. We should all be encouraging investment in entrepreneurialism.

Government should be asked how such a policy decision has been reached when these new provisions appear to cause such a disparate impact for women.

Please make this change in the Budget and reverse the income threshold. Now is the time to reverse this law and back growth and investment in the UK, for everyone.

Sincerely,