R&D suffers for the sake of taxes and the City

Industry leaders told UK consultancy firm KPMG for its electronics report that R&D expenditure was failing to keep up with growth in the electronics industry.

Crispin O'Brien, deputy chairman of the global electronics team at KPMG, said: "KPMG has been working with the Federation of Electronic Industry to lobby government to get tax credits on incremental R&D spend. We want to prime the pump on R&D and the workforce and get cash benefits for spending."

Companies that maintain levels of spend should be rewarded with rebates, he said. The rapid expansion of the electronics industry has led to a lack of staff with technical, communications, customer management and commercial skills.

In his report, O'Brien claimed too few women were attracted to electronics. "In a way we have been victims of our own success. In the 70s and 80s the UK was known as a low-cost manufacturing centre with lower social and tax costs and our working practices still relate to the production lines of those years. We are not flexible enough about home working or crèches or attracting design intellectual capital rather than core manufacturing," he said.

Companies are also finding it hard to compete with City firms offering electronic graduates £10,000 golden hello deals.