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CaSE responds to the 2024 Autumn Budget

31 Oct 2024

In the first Labour Government budget for 14 years, Chancellor Rachel Reeves made a series of announcements as part of the Autumn Budget 2024. Below we delve into some of the measures impacting R&D.

There was positive support for R&D and innovation from the Chancellor in her speech as part of the Autumn Budget. She outlined the ambition for the Budget to “drive innovation by protecting funding for R&D and harnessing the full potential of the science base.” There was clear recognition that, if supported, R&D will be vital to driving economic growth.

CaSE polling shows that a majority of people (65%) say it is clear how investing in R&D would grow the economy and more than half think investing in R&D is a better strategy to grow the economy than other typical near-term policy interventions, such as minimum wage increases or building hospitals.

It is therefore positive to see support for R&D investment even though difficult decisions needed to be made about the public finances. However, the Budget was quiet on a few important areas, including university funding and visas. We will be looking further at the detail that has been published to understand the full implications of the changes announced.

Picture by Lauren Hurley / DESNZ

Read our initial response following the Budget speech

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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.

Dr Alicia Greated
Executive Director, CaSE

R&D investment

The Budget affirmed that “the UK’s science base is a crucial national asset.” It commits to ‘protecting’ overall Government R&D investment, with £20.4 billion allocated in 2025-26. This includes £13.9 billion for the Department for Science Innovation and Technology (DSIT) of which £6.1 billion is for ‘core research funding’ and £2.7 billion is for association to EU research programmes and partnerships, and the costs of the Horizon Europe guarantee scheme. Core research covers Research England, Research Councils, UKRI talent, UKRI international subscriptions and National Academies funding.

On the face of it, this appears to be a positive announcement for R&D. There is a small increase to the overall R&D budget and an increase to DSIT’s budget. Our understanding is that the worst case scenario of a significant cut to other R&D investment following a ‘tuck under’ of Horizon Europe association costs will not materialise because of the increase to DSIT’s budget. However, we will not know the full picture until we see full DSIT budget allocations in the next couple of months.

There were also a series of other announcements.

The Government reaffirmed its commitment to provide stability and long-term certainty for ‘key R&D activities’ through 10-year budgets. This is encouraging and in line with what CaSE has previously called for. This will give confidence to businesses and globally mobile talent that the UK is serious in investing in future growth and productivity, and to leverage significant private investment in R&D. These will be set out as part of Phase 2 of the Spending Review next year.The Government should now work with the R&D sector to develop its plans for how these budgets will work in practice.

The Budget also confirms an extension of the Innovation Accelerators programme to continue to support high-potential innovation clusters in the Glasgow City Region, Greater Manchester and the West Midlands. It is positive to see the Government’s ambition to ensure the benefits of R&D are felt across the UK, as more than 60% of people in all UK regions feel it is important that their region carries out a lot of R&D

Sector calls on the Government to protect R&D funds in the autumn budget

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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.