R&D tax credit cuts threat to tech superpower plan
A plan has been unveiled to increase investment in innovation, attract talent and position the UK as a “science and technology superpower by 2030”.
However, the UK Government’s Science and Technology Framework, unveiled today, coincides with plans by Chancellor Jeremy Hunt to cut research and development tax credits which has alarmed the tech start-up community.
The framework is said to be worth £360 million and includes a £250m pot to invest in AI, quantum and biotech, £9m to help establish a quantum computing research centre and an extra £50m to help universities and research institutes improve their lab facilities.
Barclays Eagle Labs has been awarded £12m through the Digital Growth Grant to boost small and scaling technology businesses across the UK.
The British Business Bank is expected to play a role in strengtheniong support for the UK’s scaling science and technology companies while the government will implement the recommendations of the Hill Review to enhance the attractiveness of the UK as a place to list on stock markets.
Ministers want defined contribution pension schemes to unlock institutional investment into UK science and technology companies while more help will be given to deliver the Digital Growth Grant to boost small and scaling technology businesses in all corners of the UK
Michelle Donelan, Secretary of State for the newly-created Department for Science, Innovation and Technology, said: “Britain outperforms our closest competitors and we are a main challenger nation to the US and China in many areas.
“We have 4 of the world’s top 10 universities and a technology sector worth over one trillion dollars. If you put together just 8 of our university towns, they are home to more billion-dollar unicorn start-ups than the whole of France and Germany combined.
“However, when others – France and Germany among them – are moving further and faster to invest in science and technology, we have got to do the same.”
Despite the commitments, many will question whether the initial funding is enough to achieve these targets. A number of other European governments have announced similar plans recently, backed with much more capital.
In February, Germany launched a €1bn fund to invest in deeptech and climate tech companies. In January, French state bank Bpifrance promised another €500m to deeptech startups. Poland and the Czech Republic (both far smaller startup ecosystems than the UK, France or Germany) have each set up funds to support innovative new companies.
Chancellor Jeremy Hunt is expected to confirm changes to its R&D tax credit scheme that will reduce the amount of R&D spend startups can claim back from 33% to 18.6%.
A survey run by Coadec, a startup advocacy group, in January found that startups expect to lose over £100k on average as a result of the changes.
Some companies said they would move abroad to take advantage of similar tax breaks overseas.
Jonathan Geldart, director-general of the Institute of Directors, wrote to Hunt last week, urging him to reconsider. Geldart said: “We are now very concerned that it will lead to less innovation just at the time that the focus of government policy is rightly shifting to measures designed to raise the sustainable rate of economic growth.”
- increasing the UK’s reach to different audiences by delivering coordinated communications with key partners – launching the GREAT Tech campaign in March to target the West Coast of the US. The campaign aims to improve investors’ perceptions of the UK’s technology ecosystem to attract more investment into the UK
- running the UK’s second Global Investment Summit in October, with a particular focus on high technology sectors
- improving uptake of STEM subjects, technical education and advanced digital training through the Skills for Life campaign and the next phase of the Get the Jump campaign