VIDEO game companies in Dundee were last night dismayed after George Osborne cancelled a tax break for the industry, describing the proposal as "poorly targeted".
Games makers warned they might be forced to leave Scotland as a result of the move.
Manufacturers in Dundee have led the world when it comes to making hi-tech games. The previous Labour government had offered them tax relief they felt would increase spending on research and development in the UK by 457 million and create 3,000 jobs.
The industry is estimated to contribute 1 billion to the UK's GDP each year.
Colin MacDonald, from Realtime Worlds, which created the Grand Theft Auto series, said he was "hugely, hugely frustrated and disappointed".
He added: "We would hate to move away, but we're a business. When Canada is 40 per cent cheaper and France has built-in tax credits, you're looking at saving millions a year. We have to take that seriously."
Mr MacDonald said without the tax incentive many gaming companies would not be able to experiment and innovate, which would leave them falling behind in a global industry worth billions.
He added: "It was something that, before the election, all the parties were behind. We understand it's a difficult situation, but it was a difficult situation six weeks ago. At the end of the day, the country suffers."
Dundee's strong gaming industry has been helped by the talent coming out of Abertay University, which runs specialised courses in software engineering for video games.
Chris Wright, a board member for the UK's video game trade association TIGA, said he was surprised to see a Conservative Chancellor cancel a measure that would have created jobs.
He said: "This is something that already exists for the film industry and the games industry is bigger than that."
Mr Wright, who is also chief operating officer of Proper Games in Dundee, the firm which created Flock!, said the industry would lobby the Treasury to change its policy.
"We don't see this as the end of it. This is something which absolutely has to happen," he said.
While tax relief for the industry will be scrapped, there will be a small reduction in rates for capital allowances – for the majority of plant and machinery the rate will fall from 20 per cent to 18 per cent.
When asked about the tax breaks, Scottish Secretary Michael Moore said: "We needed to step back and see what we could do for businesses as a whole in the Budget, such as lowering corporation tax by 1p each year for the next four years."