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‘Spring Budget for Long-term Growth’: What are the implications for R&D?

07 Mar 2024

Yesterday the Chancellor made a series of announcements as part of the Spring Budget 2024. Although the speech itself contained minimal updates relevant to the R&D sector, the published budget included further details and additional announcements.

It is very welcome that the Government continues to recognise that “science and innovation are powerful drivers of economic growth”. There was a positive focus on business R&D investment and the environment for business R&D. Specific areas of focus included innovation locations, infrastructure and supporting innovative sectors. It is worth noting that many of the commitments had already been made in the 2023 Autumn Statement and we have not yet had time to see how these will pan out. However, if the government is serious about becoming a ‘science and technology superpower’, it will need to address a number of areas that were missing from yesterday’s announcements and which we outlined in our budget representation.

Our initial response to the budget

“It is very welcome that the Government continues to recognise that “Science and innovation are powerful drivers of economic growth”. There is clear and emphatic support from the Chancellor for UK R&D, with a positive focus on business R&D investment. It is worth noting that many of the commitments made today had already been made in last year’s Autumn Statement and we have not yet had time to see how these will pan out.”

Dr Daniel Rathbone
Interim Executive Director

The speech remained quiet on a few crucial areas

The Chancellor rightly highlighted the important role that UK universities play in the research landscape but only in passing. His speech remained quiet on the financial pressures facing universities and the vital need for improvements to their financial sustainability.  Cross-subsidy of research from teaching budgets is common, especially from international student fees, and shortfalls in funds for teaching provision would likely affect the amount of money available for research. Universities must cover the shortfall in funding for research from elsewhere in their budget. The urgency of this issue was outlined last year in Sir Paul Nurse’s review of the research organisational landscape, and has been acknowledged by the government. It has also been exacerbated further by recent changes to immigration rules making foreign students less likely to come to the UK.  Universities are a vital component of the research and innovation landscape, and it is critical to ensure that they achieve a sustainable financial model across their teaching and research activities.

There was also very little about how to support skills for a more research-intensive economy. Our report The Skills Opportunity has highlighted the importance of taking a holistic and coordinated approach to skills. Alongside a focus on upskilling the existing workforce and increasing the number of people with training in STEM, it is also vital to attract global talent to support a thriving, collaborative UK R&D sector. CaSE continues to call on the UK government to reduce the cost and burden of visa applications to attract top researchers to the UK.

The Skills Opportunity

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Supporting the environment for business R&D

The Spring Budget outlined a series of measures designed to support the business R&D environment and recognised the importance of government support in leveraging large-scale business R&D investment. CaSE are pleased to see this continued focus on boosting business investment considering the concerning trend in the recently released ONS data demonstrating a real terms stagnation in business R&D expenditure since 2018.

The Chancellor also announced that HMRC will establish an expert advisory panel to support the administration of R&D reliefs and improve the functioning of the R&D tax reliefs system, a measure that CaSE strongly supports and aligns with our recommendation to build sector-specific R&D expertise within HMRC to support the successful implementation of R&D tax credits.

UK sees stagnating business R&D investment

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Regional R&D

The Budget included an emphasis on further devolving power to local administrations and leaders who are best placed to promote growth in their regions. Several regional plans were highlighted such as the new North-East trailblazer devolution deal, £10 million of funding for the SaxaVord Spaceport in Scotland and investment of £5 million over the next 3 years in an Agri-food Launchpad in Mid and North Wales. CaSE welcomes these plans to build on existing regional strengths. In our report The Power of Place, CaSE have previously highlighted the importance of involving local leaders in decisions about regional R&D.

Data from CaSE’s Discovery Decade programme, a major study of public opinion, shows that growing regional research intensity in this way has voter appeal and brings welcome benefits to local communities. In a nationally-representative poll, more than 60% of people in all UK regions feel it is important that their region carries out a lot of R&D. Of the 5,882 respondents who felt this way, 71% were motivated by the local jobs that R&D could generate, followed by inwards investment in the area (64%) and benefits to the UK as a whole (53%).

The Power of Place

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Infrastructure to support innovation locations

We were also encouraged to see recognition of the importance of strengthening local infrastructure in supporting innovation locations, with £14 million announced to boost the UK’s public sector research and innovation infrastructure. The Budget also included funding for additional housing in Canary Warf to help transform the area into a new hub for life sciences, as well as a long-term funding settlement for the Cambridge Biomedical Campus that includes an additional £10.2 million to unlock improvements to local transport and health infrastructure.

It is positive to see these strong commitments to develop local infrastructure that supports the life sciences. We encourage this infrastructure-focused approach to be extended beyond Cambridge and London to support and grow other research-intensive regions of the UK. Building absorptive capacity through innovation infrastructure was identified by the sector at a recent CaSE roundtable as being crucial in enabling regions to capitalise on R&D investment opportunities.

Business R&D Roundtable: Leveraging regional strengths

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Supporting innovative industries

The Chancellor praised the UK’s technology ecosystem and stated his ambition for the UK to be the ‘world’s next Silicon Valley’, with technology entrepreneurs starting and growing their businesses here to the point of stock market listing. To this end, the Budget committed to unlocking more pension fund capital and making it easier for pension funds to invest in UK growth opportunities.

The Spring Budget also announced additional funding to support R&D and manufacturing projects across sectors such as the life sciences, automotive, aerospace, artificial intelligence and clean energy sectors. These welcome investments will support advanced manufacturing R&D and new facilities .

CaSE will continue to highlight the issues raised here and promote broad cross-party support for R&D in the build up to this year’s general election.