LAST week’s Budget announcement contained few shocks and surprises, yet some of the changes are vital to aiding London’s thriving hub of entrepreneurs and startups. Significantly, the government’s Enterprise Investment Scheme (EIS) looks set to benefit from a much needed boost, with the announcement of an extension to its parameters. EIS already allows tax relief to private individuals investing in small companies. Under existing guidelines, private investors can reclaim 30 per cent of the cost of the shares from their income tax liability for that same year. This is obviously an attractive offer, but has previously been limited to investment in companies of up to 50 employees – well suited to funding SMEs, but not conducive to the long-term support of a growing company.

However, George Osborne’s announcement means EIS is now likely to be extended to include companies with up to 250 staff members, providing a much more supportive structure to empower UK business growth. As Eric Schmidt, chairman of Google, said in 2011, “the UK does a great job of backing small firms and cottage industries, but there’s little point in getting a thousand seeds to sprout if they’re then left to wither or get transplanted overseas.” Notably, the change also fits in well with the venture capital model, which is specifically designed to support companies long-term from early stage startups with only a few employees, to big global businesses ready for exit.

Similarly, the Seed Enterprise Investment Scheme (SEIS) can be considered the “little cousin” to EIS, and will come into effect on 6 April. This will allow smaller angel investors to inject £100,000 into a start-up in a single tax year, and then claim back a full 50 per cent of this investment in tax relief. The two schemes combined are vital for the stimulation of the British economy, and provide genuine government support for David Cameron’s widely touted “enterprise led” economic recovery.

Most importantly, these schemes allow private angel investors and VCs to work together in a previously unprecedented manner. Business angels have a valuable role to play in supporting British entrepreneurs at the early stage of a new business, but VC firms can typically offer the larger scale investment that will take a startup to the next level of growth. In the past, this has often resulted in the private investors which supported a business at seed level missing out on the larger rewards available when a business reaches maturity, something the new schemes pave the way to eradicating.

Ultimately, forward thinking VCs will utilise the schemes within their own investments, and this can only be positive for London’s entrepreneurial hub. We have just launched the first Angel Co-Investment Fund in the UK, a pot of money specifically for joint projects between private individuals and venture firm DFJ Esprit. For entrepreneurs, this means an increased availability of growth capital, ripe for the taking of the fastest growing and most promising European startups.

This is one step towards tackling Schmidt’s observation, and ensuring that small startups are nurtured into major concerns that will help stimulate Britain’s economic recovery.

Richard Marsh is a partner at venture capital firm DFJ Esprit and manager of their Angel Co-Investment Fund.