In this exclusive article, Dr Stephane Mery, Partner at EverQuest Capital Partners, shares his insights on UK manufacturing and the potential tax-efficient investment benefits.
UK advanced manufacturing is enjoying something of a renaissance. The sector saw the largest rise in investment value of any Industrial Strategy sector last year. That capital, however, is pooling in a handful of large rounds and has yet to reach the companies that need it most.
The squeeze falls on those moving from proven process to first plant, where physical assets and lasting demand make the case. This is where the next wave of value will be built, and April’s EIS changes have opened it to investors who back the right expertise. The months ahead will show which companies make that leap, and the advisers who understand the first plant will be the first to spot them.
Where the money is going
The British Business Bank’s latest equity tracker puts the rise in advanced manufacturing investment at 49%, the strongest among the eight priority sectors, while life sciences and financial services saw investment fall. For advisers, the more telling point is that larger investors now treat industrial technology as a serious category, which improves the odds that an EIS-backed company can find follow-on capital when it needs to grow.
Look into the data, however, and a gap appears – three megadeals accounted for around £3 billion of the £4.6 billion invested in UK equity the past quarter, while investment into smaller businesses fell 43% in that same period. Headline growth therefore overstates how much capital reaches the size of company an EIS portfolio typically holds. Yet it is exactly those smaller rounds that are essential to carrying a manufacturing business to its first plant.
The move to a first plant is where many UK manufacturing companies stall. Proving a process in the laboratory is cheap by comparison, whereas a pilot or demonstration plant means paying for equipment and sites before revenue arrives. The UK Innovation Report 2026 found that domestic scale-up activity clusters in a few sectors, mostly outside manufacturing, and that too many UK companies are acquired abroad or scale overseas. For investors, thinner competition at this stage is where the opportunity begins.
Why the first plant suits EIS
Businesses at this stage also hold assets that software companies rarely have. Patented processes and physical plant can be valued and, if necessary, sold on their own merits, although investors’ capital remains fully at risk. Demand also rests on firmer ground. Supply chain security and domestic industrial capability are now long-term policy aims, which gives these companies customers whose needs are unlikely to fade with the next shift in investor sentiment.
The EIS rules have now caught up – since April, the annual and lifetime sums a company can raise under the scheme have doubled, and the gross assets test has risen to £30 million before a share issue and £35 million after. This asset test rise is particularly consequential for early-stage manufacturers. Building a plant adds to the balance sheet quickly, and under the old £15 million ceiling a company could lose eligibility just as its capital needs peaked.
That makes EIS one of the more direct routes into this stage for private clients. Public money is arriving, but the British Business Bank’s expanding direct equity programme writes initial cheques that typically start at £10 million and targets late-stage companies. The first-plant round often sits below that line, which is where EIS capital can do its most useful work. With upfront VCT relief now cut to 20%, EIS also looks relatively more attractive for clients seeking this exposure.
Where expertise earns its place
Seeing a company through its first plant rewards a particular kind of expertise, and it is one advisers can look for when assessing where client capital goes. Commissioning an industrial process tests engineering judgement as much as commercial judgement, and a manager who has scaled processes before can tell a normal delay from a flawed design. That knowledge shapes when to commit further capital and how to support management through the most demanding stretch of a company’s growth.
DEScycle shows how this works in practice: EverQuest Capital Partners and CPI backed the deep technology company after it achieved metal recovery rates above 99% from electronic waste at bench scale, with much of that development carried out alongside CPI’s engineers. It is now commissioning a demonstration plant at the Wilton Centre, with a joint venture already formed to deliver its first commercial facility. Working that closely with a company lets an investor watch a process prove itself at industrial scale.
Britain’s manufacturing renaissance will be decided at the first plant, where laboratory promise has to prove itself as industrial output. Capital has so far gathered further up the market, leaving that stage short of funding at the very moment policy has opened it to private investors. That is exactly where investors and advisors should now be looking.