The recession is expected to cause a £4bn fall in research and development spending. According to a report, this is thought to damage UK businesses' long-term competitiveness unless the government provides increased tax support.
The report warns that over the past two years, innovation has slipped far down the corporate agenda in around half of all companies.
The Management Consultancies Association says nine out of 10 UK companies have slashed their capital expenditure by up to 50 per cent. Two-thirds are looking for further cuts of about 10 per cent in the next 12 months.
The consultancies join calls for the government to help R&D investment and nurture innovation ahead of this week's Budget.
Sir James Dyson, the vacuum cleaner entrepreneur, and Lord Rees, president of the Royal Society and master of Trinity College, have called for long-term government support in R&D.
It is expected that R&D funding for start-ups will fall sharply. Deals struck by business angels are likely to drop by at least 25 per cent in the next 12 months, according to the British Business Angels Association and the National Endowment for Science, Technology and the Arts.
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