A toughened tax regime is blamed for the slump in hi-tech companies spun out of UK universities. The rules relate to shares held by academics.

Research by Oxford and Exeter universities has found flow of ideas into commercial companies had dried up. The findings are a blow to the government for whom a "spin-out" scene is seen as a high point.

MIT, the American university is renowned for its research and the number of billionaires created during the dot-com boom. The US positively encourages universities to convert academic research into commercial ventures.

The Finance Act of July 2003 seems to have inhibited the UK's response. Prior to the Act, academics only had to pay Capital Gains Tax on shares, which after taper relief could be as little as 10%.

Now they have to pay Income Tax on the value ascribed to their shares from first round investment. The tax may be payable before the academic has sold the stake.