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‘Punishing businesses’: UK startups criticise government R&D cuts

R&D government
Image credit: Jenson via Shutterstock

A letter signed by more than a dozen UK startups has called on the government to reverse cuts to research and development (R&D) tax credits.

Chancellor Jeremy Hunt announced a change to the R&D tax credit policy during the Autumn Statement aimed at reducing fraudulent claims. However, startups have attacked it as a “blunt instrument” that means smaller companies will lose out on tax credits designed to encourage technological innovation.

The letter, seen by UKTN and first reported by the Financial Times, criticised the anti-fraud measures the government has introduced.

“We recognise the intention to target fraud and misuse, but the best way to tackle these issues is to proceed with the measures that the government has already consulted on, rather than simply cutting the headline rate of relief,” the letter said.

“This is a blunt instrument, punishing the businesses that are building solutions to the UK’s most significant problems.”

The letter was signed by executives from startups including autonomous driving company Wayve, medtech company Ochre Bio, and gamified mental health support firm Thymia.

“Startups and scaleups like ours rely on R&D tax credits to develop cutting-edge technology and bring high-skill jobs to the UK,” the letter continued.

“The immediacy of the government’s cuts will be highly disruptive for some companies, particularly in a challenging funding environment, and risks undermining inward investment and economic growth.”

Dr Sarah Gates, director of public policy at Wayve, told UKTN: “The government wants the UK to be seen as a hub of innovation and one of the best places in the world to grow a startup – but the proposed R&D tax cuts will have the opposite effect.

“They sever a vital form of investment and threaten the development of some of the UK’s most exciting technologies.”

UKTN has contacted HM Revenue & Customs for comment.

UK universities have also called on the government to protect R&D support in the hopes of encouraging technological innovation.