I am pleased to hear such positive support for UK R&D and innovation from the Chancellor, and recognition that, if supported, it will drive economic growth. We also know the public care about this, with 70% of people saying it is important for the Government to invest in R&D. Seeing this reflected by Government is unequivocally a good thing.
Beyond the positive intent, it is the detail we must now turn to. It is reassuring to hear pledges to protect core R&D funding and to increase DSIT’s R&D budget, but it will take time to unpack and understand what this means in practice. We look forward to receiving more detail about DSIT’s budget allocations to enable us to build a fuller picture of the changes announced.
Innovation
There was a welcome focus on innovation, including on driving adoption and uptake across the UK. The Budget states that it is critical to the growth mission that innovative businesses are supported to start, scale, and grow in the UK.
Central to the Government’s growth mission is the Industrial Strategy, which aims to support investment in growth-driving sectors.The Industrial Strategy recognises that R&D and innovation are essential to developing the UK’s growth-driving sectors. The Government launched a Green Paper on its Industrial Strategy earlier this month, which sets out eight growth-driving sectors: advanced manufacturing, creative industries, clean energy industries, defence, digital and technologies, financial services, life sciences, and professional and business services. The Budget announced that the Government will produce plans for each sector.
The Budget confirmed long-term funding for certain sectors as part of the Industrial Strategy. This includes £975 million for the aerospace sector and over £2 billion to support the automotive sector available over five years, which were already announced in the previous Government’s Spring Budget in 2024. There is also up to £520 million for a new Life Sciences Innovative Manufacturing Fund. The Chancellor also emphasised support for the UK’s clean energy sector, with £3.9 billion of funding in 2025-26 for Carbon Capture, Usage and Storage Track-1 projects and contracts with 11 green hydrogen producers.
There was a welcome focus on support for the scale up funding gap. This includes support for the commercialisation of university research with at least £40 million over five years for spin-outs proof-of-concept funding, and improvements to the support for researchers spinning out the UK’s cutting-edge research.
To provide stability and predictability for businesses, the Government has committed to maintain the UK’s R&D tax reliefs offer. R&D tax reliefs play a vital role in supporting innovative companies in the UK.
What else?
The Budget remained quiet on Higher Education, including the significant financial pressures facing UK universities. The financial sustainability of the research system, including universities, is vital to the future success of R&D and innovation in the UK. To deliver their role in supporting the Government’s growth ambitions, universities must be supported to achieve a sustainable financial model across both their teaching and research activities. While not directly related to R&D, the increases in Employer National Insurance Contributions will increase the financial pressures on universities and other organisations in the sector.
It is positive to see the Government committed to addressing skills challenges, including through Skills England and the Growth and Skills Levy. R&D-intensive businesses and institutions will need a skilled workforce to support their sustained growth and innovation. However, in addition to domestic talent, international talent is needed to fill skill gaps and R&D is a global endeavour. It is critical that the immigration and visa system, and associated costs, do not act as a barrier to attracting skilled scientists and researchers. CaSE continues to call for immediate action to be taken to reduce upfront visa costs.
What next?
The Chancellor announced that the Spending Review is now moving into Phase 2, which will look to further establish the Government’s long-term plans. In the coming months, CaSE will be looking further at the detail that has been published to understand the full implications of the changes announced. As this progresses, we will also continue to work with our members and the wider R&D community to inform the evidence base and our advocacy plans.