NEWS25 November 2022

FSB criticises R&D cuts after ONS figures released

News Public Sector UK

UK – The Federation of Small Businesses (FSB) has branded government cuts to research and development (R&D) tax support a “disaster” as figures show that the majority of business investment in R&D come from smaller business.


Last week, the chancellor of the exchequer announced in his autumn statement that R&D tax support for small firms would be cut by a third from 14.5% to 10%.

However, figures released by the Office for National Statistics (ONS) earlier this week showed that companies with fewer than 250 employees accounted for £24.3bn in R&D investment in 2021, a £4.3bn increase from 2018.

In contrast, firms with more than 250 employees contributed £22.6bn in R&D investment in 2021.

The ONS has changed its methodology since 2018 with regards to how it measures R&D spending among smaller firms, which the FSB said addressed issues that previously undercount R&D spend from small and medium enterprises.

Tina McKenzie, policy and advocacy chair at the FSB, said: “This should have been a moment of triumph for the small business community and the UK economy. But the chancellor has turned triumph to disaster, with the self-inflicted R&D credit crunch set to cut a swathe through start-ups, spin-out and advanced engineering companies.

“Driving small R&D firms out of business is economic vandalism. The government needs to think again and reverse course before this change comes in in less than 6 months.”

McKenzie added that the government was working on “out-of-date assumptions and data” and argued it was turning its back on start-ups.

“Plans have been made, employees hired and funding committed,” McKenzie added. “Firms will be blindsided by this unprovoked attack on their hard work.

“Our inventors, scientists, engineers and entrepreneurs need a government that backs them, not one that drives them out of business.”