Planned cuts to research and development (R&D) tax relief will hammer small business innovation, the Federation of Small Businesses (FSB) has warned.
A survey by the business group shows that tens of thousands of small firms are likely to scale back investment if the UK government goes ahead with plans to slash R&D tax support for SMEs.
One in five small firms that have been supported through the R&D tax relief scheme in the last three years said that cuts to the tax relief rate will reduce their viability.
Almost two-thirds (64%) of firms that received the tax relief said they are now less likely to invest in innovation — equivalent to 50,000 small businesses. Another quarter (24%) feel they will be forced to focus on lower-risk projects and one in ten (12%) expect to make staff redundant or put recruitment plans on hold.
New entrants will take an even bigger hit, with four times as many firms not currently undertaking R&D saying they are now less likely to take the plunge.
“The UK risks being left in an innovation wasteland if Jeremy Hunt does not take control of Treasury innovation policy and restore the single most successful industrial policy of the last decade,” said FSB chair Martin McTague.
“Our findings are a reminder to the Chancellor that the government still has time to do the right thing — delay or scrap the plan to cut R&D tax credits for small businesses from April.”
