Small businesses: Smaller firms welcome funding incentives to invest in research

Sir James Dyson hailed the Government's backing for small business with improved tax-credit incentives for research and development and improvements to the Enterprise Investment Scheme, saying the measures recognised the importance of innovation investment in the UK.

He said: "At last, a Government is saying that science, technology, and engineering is important, as well as exports. This sends out a great message."

The Budget increased the rate of relief on R&D activities from 140 per cent to 200 per cent from April. This will rise again to 225 per cent next year. The move encourages small and medium-sized businesses to invest in developing new technology.

Sir James, who had made a similar recommendation in a report for the Government last year, said: "R&D is risky and a long-term investment. It is tempting for companies to look for short-term gains. With this budget, the Government is taking a long-term view."

The changes have been welcomed by a series of industry bodies including the video game representative Tiga, which had lobbied for such a move. Samantha Vanags, head of R&D at the accountancy firm Grant Thornton, said: "R&D provides a key platform for UK business and makes a major contribution to our competitiveness on the global stage. It is vital that this activity is encouraged."

Sir James said the changes to the Enterprise Investment Scheme (EIS), designed to encourage investment in small business, were also positive. "Our best and brightest university researchers, high-tech start-ups and entrepreneurs are those who will keep Britain competitive and reduce the deficit. The Chancellor has granted them more freedom," he said.

The Budget lifts the EIS's tax relief from 20 per cent to 30 per cent and almost doubles the maximum investment to £1m.

Not everyone was happy. The Forum of Private Business said the Budget's small business strategy was "just a first step" arguing plans on tax and red tape "should have gone further".