The Journal: Keep Incentives For Investors To Help Home-Grown Firms
The Journal, Thursday 15th August 2024: Keep Incentives For Investors To Help Home-Grown Firms
By Robert Forrester, CEO of Vertu Motors plc
The potential of a region for growth can always be seen when luxury brands start to offer their goods for sale there. The North East is a place that iconic brands are being sold more and more. Clothing labels like Versace and Christian Louboutin are available in stores on Newcastle’s Northumberland Street. Luxury car brands have made their mark too. Now, the most prestigious motorcycle brand in the world – Ducati – is to again offer its bikes for sale here, in a dealership our firm has opened in Boldon, Sunderland. For the non-bikers among readers, Ducati is to the motorcycle world what Ferrari is to motoring. It was founded in 1926 in Bologna, Italy, and since 1946, it has built racing inspired motorcycles characterised by innovative design and cutting-edge technology.
For Ducati to offer its products at a dedicated dealership in the North East is a positive indicator that our region is growing and, with unemployment at a long-term low and the economy having turned a corner, the time is right for an investment in of this type.
How have we managed to attract Ducati? Well, global brands want to work with proven performers, and Vertu Motors, is now the biggest home-grown firm in the North East. It was founded by a group of us only 18 years ago. Since its launch, from a small office next to the River Tyne, it has grown to be a business turning over £4.7bn, and employing 7,600 people in 188 outlets around the country.
We now sell and service vehicles from 32 motor brands in different locations; from BMW to Volvo and all the other biggest names too. The company has always retained a mission to invest in the North East, to locate its HQ and leadership here, and to employ hundreds of our essential people here in services such as marketing, IT and property.
There is no question that the location of growing businesses in the North East is fundamental to the region’s ambitions to ‘level-up’. The new Government has, rightly, put growth at the heart of its economic policies. Success stories, like Vertu, should be a template the politicians can follow. We did not get here via any direct Government subsidy or state interventions. Our early successes happened because there was an appetite from the private sector to invest tens of millions of pounds in our firm.
The investments were only possible because of the City of London and in particular its Alternative Investment Market (AIM). We used AIM to attract investment capital, which we used to build the business. It was critical both that investors had belief in our ideas and a pool of capital to be invested.
Established as a subsidiary of the London Stock Exchange, AIM is designed to help burgeoning companies reach capital markets more easily. Not only does this bolster the growth of smaller firms, but it also offers tax advantages for those investing in them; increasing the amount of available money available to drive investment and growth.
One of the primary benefits of AIM is the exemption from stamp duty on share transactions. Typically, investors pay a 0.5% stamp duty on most UK share purchases. For AIM-listed shares, this cost is waived, reducing the initial financial barrier to entry.
Perhaps even more significant is the potential for 100% relief from Inheritance Tax (IHT) through Business Relief, provided the shares are held for at least two years. This aspect is crucial for investors focused on estate planning, as it enables them to pass on more of their wealth to their heirs without a hefty tax penalty. A number of our investors are IHT funds.
The benefits also extend to Capital Gains Tax (CGT). Investors can defer paying CGT when they reinvest a gain into shares of qualifying AIM companies, with the possibility of accessing Entrepreneurs' Relief, which can reduce CGT to just 10% on certain disposals, subject to a lifetime limit of £1 million. Additionally, the inclusion of AIM shares in Individual Savings Accounts (ISAs) and Self-Invested Personal Pensions (SIPPs) allows for tax-free income and gains, further enhancing the tax efficiency of these investments.
Always talk to an adviser to check these points before you invest. These tax advantages are important to make AIM an appealing option because there are more risks associated with investing in smaller, less mature companies. Obviously, they can become larger, more mature business over time, like Vertu.
I have explained all this to make a point that there is a direct relationship between tax-friendly incentives to the investment, jobs and opportunities that follow for places like the North East. Ducati is opening here because people and pension funds invested in our firm.
It is no good believing that a Government can just tax its way to a balanced budget given the level of debt the UK Government has; it needs growth and that comes from investment. The investors that put money into Vertu Motors Plc might well include your pension fund as well as individuals; the tax benefits accrue to all and it is worthwhile keeping them.
When I hear politicians talk about ruling out tax on ‘working people’ I know they want to tax gains by investors, reducing the incentive to invest. Those gains are often the product of risk, and risk is inherent in starting and running a business. It is successful businesses, like Vertu that employ ‘working people’ and pay substantial tax on profits. I want to see other home-grown success stories, like ours, on the AIM market and I hope the Government will encourage them by keeping investor incentives when it makes budget decisions later in the year.