The report from the Science and Technology Committee, which urges the government to increase funding for the sector and set up a bond market for smaller firms, adds to pressure on Chancellor of the Exchequer George Osborne to give more support to businesses when he presents his economic plans in his budget statement March 20.
Concerns that science and technology firms are struggling for finance undermine a stated priority of the government to promote the sector, as part of an overarching plan to rebalance the economy towards the manufacturing and exporting industries.
“British entrepreneurs are being badly let down by a lack of access to financial support,” said Andrew Miller, the committee’s chairman, in a statement accompanying the report. The current system “often forces them to sell out to private equity investors, or larger foreign companies to get ideas off the ground,” he said, arguing that the result is that jobs and profits are often generated overseas, rather than in the U.K.
“The government does not have a coherent strategy to support the commercialisation of technological innovation in the U.K. and is failing to secure the full economic benefits of our world-class science base,” the committee said in its report.
The committee said that despite government initiatives to increase lending to smaller firms–most notably the current Funding for Lending Scheme–there is still evidence that financing conditions are onerous for science and technology firms.
“The committee heard that banks were often requiring entrepreneurs to provide family homes as security to obtain these loans,” it said in the report.
The most recent figures for the FLS showed banks cut back lending in the U.K. in the final six months of 2012, despite tapping the FLS for 13.8 billion pounds ($20.6 billion) of cheap funds earmarked for making loans. Those figures have prompted speculation that Mr. Osborne will adjust the program to put more pressure on banks to lend to businesses.
The government has focused on science and technology as a part of the U.K. economy it wants to flourish in coming years. Business Secretary Vince Cable said Monday the industry is a “key priority” that should be exempt from any austerity measures.
The government has taken action to support the sector, including tax relief for research and development and cuts to corporation tax levied on products patented in the U.K.
Jason Douglas contributed to this article.
Write to Alex Brittain at email@example.com
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UK Science and Technology Firms Starved of Credit – Fox Business