• silicon.com
• Management
• Public Sector

By Nick Heath, 22 September 2008 10:00

NEWS

The UK government has been accused of "mortgaging the future" after it pulled funding for high tech start-ups.

A business advisory service at St John's Innovation Centre in Cambridge - which helped 400 new businesses in 2007 - will shut in 2009 because of a lack of cash, according to centre director Walter Herriot.

Speaking at the Cambridge Enterprise Conference last week, Herriot attacked the government for raiding the budgets of the UK's regional development agencies (RDA) - including that of the service's main backer in the East of England - to help fund a £1bn package of measures to stimulate the housing market.

The East of England Development Agency (Eeda) said that over the next three years its budget is expected to drop by £21m and that RDA funding is tipped to be slashed by £300m nationally.

The Eeda told silicon.com it had yet to decide what measures it will take to reduce spending on services but Herriot said he had been told by a senior representative at the agency that "there was no point discussing the advisory service because Eeda did not have any money available" to fund it.

The government admitted that RDA funding will help pay for the housing measures but said it will put £4bn into RDAs over the next three years.

Herriot said: "The government is not putting its money where its mouth is and is in danger of mortgaging our future.

"The innovation centre and the advisory service got a lot of funding from the East of England Development Agency. Now the support to 400 businesses per year that the service provides will be no more.

"Companies using this service are three times more likely to raise equity and it gives them a real leg up in terms of business support."

Internet answer engine True Knowledge is based at the innovation centre and company founder William Tunstall-Pedoe praised the help that it received from the advisory centre, as well as an Eeda grant that helped kickstart the company.

He said: "The early advice helped us and starting a business is really hard so everything that makes it easier is absolutely a positive."

Cooling tech company Camfridge is also based at the centre and managing director Neil Wilson said it had aided the business in reaching a wider market.

Wilson said: "Their help with contacts helped us to find partners in Europe.

"We find we rely on the service more as we try to engage with more customers in lots of places and take the next step up with the business. It would be a real shame to lose it."

Chairman of Eeda Richard Ellis said: "We're very disappointed with this unexpected cut in funding. The impact of a major reduction in Eeda funding will be significant for businesses, communities and people who live in our region."

A spokesperson for the Department for Communities and Local Government added: "It is right that we deal with the immediate pressures in the current housing market. We have been completely upfront about where the money is coming from."