There was also a reduction of £8m in SEIS fundraising, which fell to £169m.
Mark Brownridge, who left Mazars Financial Planning to become director general of the EIS Association last year, explained that 2015 rule changes affecting the venture capital funding sector were designed to limit and restrict businesses’ eligibility for EIS and SEIS funding.
He said, therefore, the fall in EIS and SEIS fundraising “was no surprise” and “the only unexpected thing is that the decline was not greater”.
He said: “Our greatest concern from these figures is that there’s been a meaningful drop in the number of companies raising money via EIS for the first time. Well in excess of 1,000 businesses raised money from EIS in 2014-15 for the first time, but that fell by some 300 in 2015-16, to 787.”
EISA blamed this on EU-imposed measures contained in the 2015 rule changes, and the withdrawal of energy subsidies as a qualifying EIS investment.
Mr Brownridge said: “The EIS Association believes those changes have been harmful to the UK’s business and enterprise sector, and therefore to the economy as a whole, and the drop in the number of companies obtaining EIS funding for the first time reflects this.
“Should this become a trend it would mean fewer and fewer businesses are being granted access to vital EIS expansion funding that they may not be able to obtain from other sources. ”
He said: “We continue to believe the 2015 rule changes are counterproductive and not in our economic interests. We have called on the Government to reverse them and will continue to campaign on this matter.”
Despite the fall in the latest figures, the £1.65bn raised was still the second highest ever amount raised since EIS began in 1993.
Mr Brownridge said this showed that despite the new rules restricting the EIS sector, the Enterprise Investment Scheme “remains an extremely important and necessary source of funding for UK businesses”.