Spending Review delivers fresh investment but details to come later in the Life Sciences Sector Plan
In our latest blog, Dr Martin Turner, BIA’s Director of Policy and External Affairs, breaks down the Chancellor’s Spending Review and what it means for our sector. From a multi-billion-pound boost to R&D and life sciences manufacturing, to scaling innovative businesses through the British Business Bank, the Review signals significant investment — but many questions remain.
The Chancellor’s long-awaited Spending Review outcome has outlined increased investment in R&D and scaling life sciences businesses from 2026 to 2030, in an overall settlement that sees day-to-day government spending increase 2.3% under Labour and capital investment increase by 3.6%.
Life sciences was highlighted as a UK strength in a speech that set growth and the NHS as spending priorities, but much detail remains to be seen as we await the Industrial Strategy and Life Sciences Sector Plan promised later this month.
However, there was plenty of interest to the life sciences sector in the accompanying Spending Review documents. Read on for our full breakdown and register for our webinar to hear more tomorrow.
British Business Bank and increasing private investment
The Chancellor’s speech began with a promise to remove barriers to growth and unlock investment, including through the pension reforms that BIA has championed.
To complement this, the British Business Bank (BBB) financial capacity will be increased by £10.3 billion to reach £25.6 billion – a two-thirds increase in support for UK innovative businesses compared to its position before the Spending Review. This expansion will take BBB investments to around £2.5 billion each year. Details of how this will be spread across the Bank’s programmes will be published in the coming weeks, but we understand there will be a strong focus on the Industrial Strategy priority sectors, including life sciences.
The budget increase has been enabled by the changes to the fiscal rules made at Autumn Budget 2024, whereby the Bank’s investments are seen as assets rather than liabilities in the government accounts. It also has a newly permanent capital base (rather than returning profits to the Exchequer), giving greater flexibility to reinvest returns over the long term to increase growth and prosperity across the UK.
The National Wealth Fund also received a £5.8 billion budget uplift to £27.8 billion this parliament, some of which will be invested into life sciences, we anticipate, although its plans are not fully formed.
Alongside the Spending Review, HM Treasury has published the findings of its review into the Green Book – the government’s guidance on value for money. We are yet to study or even see the details, but this could address some of the reasons life science investment business cases aren’t always approved by the Treasury.
R&D and manufacturing
The Department for Science, Innovation and Technology (DSIT) settlement provides a real terms budget growth rate of 2.8% over the spending review period.
This includes increased R&D funding, reaching £15.2 billion per year by 2029-2030. This funding will flow to the world-leading scientists and innovators in UK businesses, universities, and R&D institutions across the UK. Between 2026-27 and 2029-30, these budgets include:
-
Funding for UK Research and Innovation (UKRI), and association to Horizon Europe and its successor, supporting vital investment in universities, research institutes and businesses across the UK;
-
At least £1 billion to significantly scale up the Advanced Research and Invention Agency (ARIA), to fund breakthrough R&D designed to catalyse future growth;
-
New sectoral and technology programmes, directly focused on the modern Industrial Strategy. More details will be set out in the Industrial Strategy;
-
£500 million for an R&D Missions Accelerator Programme to break down barriers and accelerate the delivery of the government’s missions;
-
£410 million for a Local Innovation Partnership Fund to support local leaders to drive innovation excellence across the UK; and
-
Up to £750 million for a new supercomputer at Edinburgh University (which was previously cancelled when Labour came into power).
Defence is also receiving an £800 million R&D uplift, some of which will go to engineering biology and biosecurity, as outlined in the recent Strategic Defence Review.
A commitment to invest up to £520 million in life sciences manufacturing funding from 2025-2026 to 2029-2030 to build resilience for future health emergencies was also confirmed in the spending review. BIA has campaigned for this over many years, and this was a core ask in our Spending Review submission.
No further detail was given on the already-announced £600 million to launch the world’s first Health Data Research Service to accelerate the discovery of life-saving drugs. Funding will come from DSIT and the Wellcome Trust, but we cannot see what the Government’s contribution is.
AI
The DSIT settlement also provides over £2 billion over the spending review period to implement the AI Opportunities Action Plan in full, including:
-
Funding to enable a 20-fold expansion of the UK’s AI Research Resource capacity compared with the existing programmes. This new compute capacity will enable UK researchers and start-ups to lead in AI discoveries and advancements;
-
Up to £500 million for the creation of a new UK Sovereign AI Unit working with the British Business Bank to support the emergence of national AI champions;
-
£48 million for the Tech Expert programme to drive collaboration with universities to expand AI course provision, develop new AI educational pathways, and support AI talent scholarships, which will attract the brightest minds to UK universities, which will be complemented by BIA’s #BIGIMPACT campaign; and
-
£240 million for the AI Security Institute to remain at the forefront of frontier AI research.
NHS and the medicines budget
The Chancellor said the NHS is a top priority, and the spending review provided a £29 billion real terms increase in annual NHS day-to-day spending from 2023-2024 to 2028-2029. This will take spending to £226 billion by 2028-2029, equivalent to a 3% average annual real-terms growth rate over the period.
There was no mention of the medicines budget, however. The life sciences industry has been eagerly awaiting the outcomes of the Voluntary Pricing, Access and Growth (VPAG) review, which was announced by Health Secretary Wes Streeting at the beginning of the year, with his acknowledgment that medicines spending was incorrectly seen as a deadweight cost rather than an opportunity to leverage industry investment. Reports in the press on the progress of this have not been reassuring. We also eagerly await the 10-Year Health Plan, expected by the summer.
More positively, up to £10 billion will be invested in NHS technology and digital transformation by 2028-2029, an almost 50% increase from 2025-26.
However, it appears there’s no increased R&D budget for the health department, which will remain at £2 billion per annum until 2030, meaning NIHR will likely not have additional capital for its ability to support clinical research in the NHS. £300 million from the VPAG agreement, which is earmarked for improving commercial clinical research, will go some way to make up for this flat cash settlement.
The R&D elements of the Overseas Development Assistance budget are also being halved. Some of this budget supports health research related to developing countries.
Skills
The government is providing £1.2 billion of additional investment in training and apprenticeships provision per year by 2028-2029. This includes funding to support over 1.3 million 16-19 year olds to access high-quality training, supporting 65,000 additional learners per year by 2028-2029. This will be guided through Skills England, which recently recognised the life sciences skills gaps that it should address.
Rail and other infrastructure
Beyond the R&D and computing infrastructure described above, the life sciences sector will also welcome the continued delivery of East-West Rail in the Government’s spending plans, with £2.5 billion in new investment to provide additional connectivity and unlock growth across the Oxford-Cambridge corridor. Rail investments in the North of England also received a funding boost, and more details will be set out in the upcoming 10-year Infrastructure Strategy.
As well as the upcoming strategies, individual government departments will allocate final budgets to their agencies, including UKRI, Innovate UK and MHRA. BIA will continue to work closely to ensure these allocations are sufficient to enable the UK life sciences sector to continue to grow in the UK.
The Spending Review document, the Chancellor’s speech and all associated supplementary documents can be found on the Treasury’s website.
Register for our webinar to hear more tomorrow.
