Policy Innovation Blog

Galloping gazelles - was this a budget for growth?

Stian Westlake - 23.03.2011

Our recent reports, Vital Growth and The Vital 6 per cent, have both called for government to create an environment which allows the high-growth innovative businesses most likely to create the jobs of the future to flourish.

We are therefore delighted that this argument seems to have been taken on board with a few key aspects of today's Budget.

The Enterprise Investment Scheme (EIS)

The extension of this tax relief is very welcome not least because it recognises the crucial role the scheme plays in the supply of finance for early stage businesses – more important than ever in the face of a steep decline in the availability of venture capital.

This is something we’ve long been calling for (see Incentivising the Supply of Finance for Early Stage Business Through Tax Schemes: A Preliminary Analysis of the Impact of EIS, VCT and CVS) where we estimated that 34%-52% of the amount invested would not have been invested in the absence of EIS.

R&D tax credit

NESTA also welcomes today’s simplification and expansion of the R&D tax credit. This is something called for in our work with Sir James Dyson (Ingenious Britain) and is of huge importance for industries such as the UK’s video games sector (see our report The Innovation Game). This will support and encourage our most innovative firms to make longer-term investments and take the sorts of risks which have the potential to grow their business in a sustainable way for the benefit of the UK economy.

Digital and creative skills

The growth paper accompanying the Budget also contained some very encouraging news about the need for increased skills in the digital and creative industries.

The Plan for Growth (pp 99 - 104) cited our influential Livingstone-Hope Skills Review of the video games and VFX industries and pledged to publish a response to its 20 recommendations in the summer.

Together, these announcements are critical to creating the right environment for nurturing UK innovation. Access to finance and incentives to innovate are crucial to stimulating future economic growth.

As our research demonstrated (see Vital Growth) if we want to have the big British businesses of tomorrow we have to look after the gazelles of today.

Read more about the changes to EIS tax incentives in a post by NESTA's Yannis Pierrakis