UK risks falling in scientific investment, industry warns
Jeremy Hunt’s ambition to turn the UK into a “science superpower” is at risk unless he increases tax relief to attract private investment, the industry has warned.
The British Private Equity and Venture Capital Association said the recent reduction in Research and Development tax incentives means an estimated £1 billion per year in relief is no longer available for businesses.
The changes have seen the UK’s rate of tax credits for R&D investment by small companies fall to 19 pence for every £1 invested, according to the BVCA, or 27p for a subset of “R&D intensive” companies.
This means that the UK now lags behind its competitors, including France, which offers 30p for every £1 invested in R&D, and Australia, which offers 45p.
The BVCA also warned that the future of the UK’s Enterprise Investment Scheme and Venture Capital Trust schemes, which have helped incentivise investment into early-stage companies, are in doubt.
The association said: “Whilst the government has made promises to extend the EIS and VCT schemes, this does not go far enough. The UK rule book still provides that the schemes will end in April 2025: a so-called “sunset clause”.
“This has created an uncertain environment for UK firms and investors, who are making decisions now about their investments over the next 12-18 months.”
Without certainty around these schemes, the BVCA said the chancellor risks jeopardising long-term investment in technology and making the UK a less attractive place to invest. As a result, it is calling on the chancellor to remove sunset clauses altogether from the EIS and VCT schemes.