On New Years Day this year, I remember reading so many references to the roaring twenties. If the press were to be believed, we were in for the most incredible boom. The misery of the financial crisis disappearing out of the rear view mirror, Brexit hadn’t affected growth as much as some thought, and there was renewed optimism that a pro-business UK government with a large majority would drive us onto greater heights.

If Fram’s hiring activity for the tax efficient industry was anything to go by, the journalists were correct. We’ve long worked with tax efficient providers and whilst we recruit across functions, I think it’s fair to say we’re one of the leading recruiters for distribution, and firms were continuing to build their teams at pace.

According to HMRC, in 2018-19 £1.8 billion was invested in 3,905 EIS qualifying companies. This is a huge amount of money and perhaps the social benefits of these investments are often played down or misunderstood. Whilst there are clearly tax advantages for high net worth investors (never popular with the media), the benefits to the economy significantly outweigh the favourable tax treatment of EIS/VCT investing. According to the Federation of Small Business, 60% of all employment in the UK is generated by SME’s and these SME’s account for 50% of private sector turnover. What’s perhaps even more astonishing is that many SME’s are sole traders and therefore those that do employ people are huge generators of jobs. Nowhere has played its part more in the jobs miracle than London. According to Deal Room, the UK generated 63 tech unicorns in the last 10 years and at one point London generated more fintech investment than comparable sized European Capitals combined. Wow, wow, wow!

Then COVID hit.

My last face to face meeting was with a tax efficient provider in London in early March, and already the streets of London were quiet. The client was still hiring, as were most of our other clients in this sector, but the timing of the virus couldn’t have been worse. What we’ve learnt from working with tax efficient providers is that when March comes you’re lucky to get time in their diary, as they are rapidly closing their fundraisings before tax year end. These types of investments have always been perceived, whether rightly or wrongly, as higher risk. They are part of a client’s portfolio and separate from their main investment pool of money, and in short many clients went into complete risk off mode at I suspect the wrong time for many. However, to simply say that is too simplistic.

COVID-19 seems to have accelerated every theme we’d seen before the virus. In three months the high street is undergoing a painful transformation that probably would have taken 5-10 years to complete under normal circumstances. Internet shopping was on the rise, it’s rocketed during the lockdown. Firms were already under increasing pressure to give employees more flexibility. We’d seen some offices that didn’t have enough desks for all employees, should they all come in on the same day, but they were in the minority. Then, overnight, we all realised we could run our firms from home. Fixed costs and long leases went out of fashion faster than a pair of Brossette’s jeans, and travel bills plummeted, as firms serviced advisers remotely. All in all it’s worked well.

What does this mean though for the offices of the future? For London? For types of investments?

Well, it’s hard to tell, but we feel that offices will re-open very soon, albeit working patterns will be different. There’s a general acceptance that nobody needs to go back to an office environment 5 days a week. However, there’s also a realization that if colleagues don’t meet soon spontaneity and idea sharing will slow. Our expectation is that the government’s advice will soon change from “avoid public transport” to “avoid rush hour” and many offices will reopen quickly, as they have done across Europe. There is no doubt that there are firms chomping at the bit to get selling again. There have been a small number of redundancies in this field, but we feel this may be quickly reversed and their will be a foot race to grab market share. Indeed a small number of firms have started to hire again.

London possibly faces headwinds with Brexit and has remote working changed the notion that talented people need to gather in the same room? Can some roles be carried-out remotely? The answer in some instances will be “yes”. However, we feel London has a strategic advantage as it’s still a major financial centre with a hugely talented, global, workforce, and therefore good ideas will be connected with pools of capital that may not be available to firms based overseas.

However, what we hope more than anything else is that the government really backs the tax efficient investment industry. Private capital will be essential to the rebuilding of the economy and looking at the statistics above, significant job creation is most likely to happen at SMEs and within innovative industries. Our clients within the tax-efficient sector play a key role in not only providing capital, but in nurturing the potential unicorns of the next 10 years.