A key proposal in the Budget aims to stimulate hi-tech innovation by allocating at least 2.5 per cent of the public sector's external research and development budgets to small companies.

The measure will 'stimulate small technology-intensive companies with a guaranteed £100m share of public sector contracts', said Brown.

The proposal was a key measure recommended by Computing's Agenda Setters committee on innovation in IT (Computing, 16 September), and an issue that the panel urged the government to take on board. The problem facing many startups with potentially radical new products is the inability to break through the ranks of the incumbent suppliers that exercise an iron grip on the industry.

'It is an excellent precedent,' said John Higgins, director general of trade group Intellect.