Investments 2020 – what you need to know | Films4U
How has the coronavirus affected investments in 2020?
There’s no doubt that the coronavirus has impacted financial markets globally. It’s also affected people’s physical and mental health. The global job market hasn’t fared much better either. At the moment, 1.5 million people in the UK are unemployed – that’s an unemployment rate of 4.5%.
But what about investments in 2020? If you’re thinking of investing – or you already have – you’ll want to know how to keep your money safe. With infection rates rising, it’s easy to adopt a negative mindset. The crisis has affected many sectors, including the travel, aviation, and retail sectors.
Very few companies have escaped this economic maelstrom unscathed. We’ve seen big names suffer along the way, with brands like Carnival Cruise Line and easyJet dropping out of the FTSE 100 as their shares plummeted.
Light at the end of the tunnel?
Does this mean you shouldn’t invest? Although it’s right to be cautious, there’s no substitute for jurisprudence. Not all sectors have been hard-hit. In fact, many appear to be thriving under these difficult economic conditions – despite the fact that a vaccine for COVID-19 still seems a long way off.
Increased market volatility
What do we mean when we discuss investments in 2020 in terms of market volatility? The expression – when applied to the stock market – refers to a period of uncertainty characterised by abrupt drops and rises. This means the value of an investment can vary considerably: minute-by-minute, hour-by-hour, and day-by-day.
These dramatic swings in terms of value merely indicate turbulence. Rather than focussing on the lulls, it’s important to focus on the lifts. Investments in 2020 will also experience welcome rises – and so is it really all doom and gloom? In reality, this volatility is often an inaccurate reflection of an investment’s true value (as these changes are merely transitory).
Patience is the key factor here. If you are eyeing investments in 2020 with caution, remember that to succeed you must be willing to play the long game. In other words, fortune favours the patient.
That’s not to say you should be reckless. Approach each opportunity with an open mind and research the company you’re interested in – and its appropriate sector – thoroughly, so that you can make a fully-informed decision.
Sectors worst affected
COVID-19 has affected businesses abroad and closer to home. Shifting perspective to our immediate locale, the impact coronavirus has had on the UK economy since March 23 is startlingly clear.
The sectors worst affected have been aviation and retail. No business has escaped unharmed, with well-known brand names like Debenhams, Marks & Spencer, and Boots announcing plans to axe jobs. Some names – like Oasis and Warehouse – have sunk without a trace.
Have any industries escaped the wrath of COVID-19? Some, yes. And we’ll talk about those shortly. But the crisis has also affected the car, restaurant, and double glazing industries (to name but three).
This doesn’t mean that investment in 2020 should grind to a complete halt. As mentioned earlier, volatility doesn’t necessarily equate to a lesser value.
Sectors that have thrived
Let’s consider investment in 2020 in a more positive light by looking at some of the success stories that have arisen out of this crisis.
The pharmaceutical industry is heavily involved in the quest for a COVID-19 solution. Companies racing to find this ‘cure’ include Pfizer – whose Prevnar 13 vaccine has risen in popularity – and Gilead, the creator of Remdesivir. Investment in this sector is likely to continue due to the pivotal role it’s playing during this crisis.
The limitations for film production companies & EIS film investment
Limitations apply that will naturally prevent some film companies from securing EIS investment. One such example would be a company looking to produce one movie. Its lack of a long term goal would preclude its ability to create an ongoing stream of taxable income. In essence, the EIS investment scheme exists to foster continuous growth. Film producers must, therefore, convince the HMRC of their plans to create a sustainable income stream.
HMRC versus film investors
Since tax breaks were introduced by the Labour government in 1997, the relationship between HMRC and film investors has been characterised by confusion and frustration. Financiers are often told to supply more information to secure approval but they can rebuke this request, as they feel HMRC should have an existing knowledge of the sector already.
The creation of the earlier-mentioned BFI scheme could be seen as an attempt to diffuse this confusion and introduce some much-needed clarity. This initiative is already showing signs of success and has enjoyed welcome support from within the UK film industry as a whole.
Capital condition: The risks
Has the investment in question been structured to present minimal risk to its financiers? To answer this question, two conditions must be satisfied. The company must clearly demonstrate its plans for long-term growth. It must also reveal what risks exist and, in such cases, signal this to its prospective group of investors.
If you want to find out more, read HMRC’s guidance on the topic here.
Companies must be UK-based
To be eligible for the EIS and SEIS schemes, companies don’t have to film in the UK. It is acceptable for the movie to be filmed across multiple locations. However, the producer must be able to prove their company is permanently based in the United Kingdom.
Despite the pandemic, people still need to buy things, and spending has increased across e-commerce platforms. Perhaps this is because consumers have more time on their hands and are buying out of boredom. Some of this activity can be explained by the increased use of food delivery services like Just Eat and Deliveroo.
Are you a film financier? If so, you’ll be pleased to learn that this sector is booming. This is thanks to the success of online streaming platforms like Amazon Prime, Disney Plus, and Netflix, who have acquired many successful series and the rights to original movies. Now’s a great time to think about film investment in 2020 if you’re a film investor.
It’s no surprise to find the gifts sector is on this list. If e-commerce is thriving, so too should this industry. Presents for special occasions – like birthdays, Mothers Day, and Easter – continue to be popular online choices for consumers. Looking for ideas for investments in 2020? This sector is one you’ll want to get involved in.
More people than ever before are working for home. Global corporations, small businesses, and sole traders alike now rely on video conferencing platforms like Zoom and Google hangouts to talk to their teams and liaise with new or existing customers. It’s no wonder this sector is thriving.
How to choose an investment in 2020
Investment is about taking risks. Does that mean you should direct your hard-earned money toward poorly-performing sectors in the midst of a crisis? Probably not. Instead, manage and limit the risks you take by identifying companies operating within growth sectors who are likely to yield a solid return.
As mentioned, the film sector is proving to be a better investment opportunity in 2020 than others that have been previously stable. This industry is not without its unique element of risk but certain tax advantages are available to film financiers who want to enjoy a slice of profit from this glamorous and ever-popular sector.
To learn more, check out our articles on the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS).
Invest in film
Looking for ideas for investments in 2020? Films4U has over 100 years of combined experience and is connected with many influential professionals within the movie industry.
We have a strong record of success, as evidenced by previous projects we’ve worked on, and guarantee to give your film distribution. Don’t forget that certain tax incentives exist to give film investors like you a step-up into this thriving but nonetheless competitive arena.