By Nick James

The government must resist the temptation to allow the much improved and user-friendly R&D tax credit to wither on the vine, as it is particularly valuable during a recession, the CBI said today (Wednesday 4th February).

Publishing new survey findings showing that companies doubled their savings on research and development (R&D) under the scheme between 2005 and 2008, the UK’s employers’ group said it would send all the wrong signals if it were to be abandoned.

The survey, conducted with the support of three trade associations, shows that business confidence in R&D tax credits grew dramatically in the last three years. The credit is now an important factor for companies when deciding where to base R&D operations, and it improved the attractiveness of the UK as a destination for high value investment and jobs.

In a recession, it is even more important that firms are able to invest in new ways to compete so they are better placed once an upturn comes. The benefits of R&D also take time to materialize, so the CBI is urging government to think long-term, keep the incentive and continue improving it for the benefit of the whole economy.

Richard Lambert, the CBI’s Director-General, said: "As our economy seeks to re-balance over the months ahead, the government must recognise the value of the R&D tax credit and commit to retaining it and encouraging more firms to invest in research and development.

"It should also go further by building on its success; extending the rate and range of credit, enabling more companies to apply and covering more of their associated overheads.

Roy Seger from AIRTO, said: "The survey shows how the R&D tax credit is key to sustaining a strong research and development base in UK companies. It also indicates how important relevant and commercially focused R&D is to the future of those companies, especially in such difficult times."

Tom Wills-Sandford from Intellect, said: "It is very encouraging that the UK’s R&D scheme is coming of age and delivering improved results, particularly for SMEs. In the technology sector, we have been delighted to see the change in culture at HMRC."

Ian Godden from SBAC, said: "The R&D tax credit has proven to be a significant assistance scheme to businesses in aerospace manufacturing and, if this vibrant industry is to deliver for Britain in the future, it should be continued."