The Labour Government has, in its Spending Review, announced a £86 billion research and development (R&D) funding plan to drive innovation and growth across the UK.

The funding plan will form one of the foundations of its Modern Industrial Strategy, to be published towards the end of June, and is designed, in the words of the Chanceller Rachel Reeves, to “turbo charge” the development and growth of life sciences, green technology, advanced manufacturing and AI software.

It will, says the Government, drive breakthroughs across a wide range of fields, from drug treatment to longer-lasting batteries and innovative software and AI and the skills needed to support that.

£500 million will be made available across the UK through a Local Innovation Partnerships Fund designed to stimulate and develop ‘innovation clusters’ across the country. Funds are expected to be given to the seven Established Mayoral Strategic Authorities in England, being Greater Manchester, West Midlands, South and West Yorkshire, Liverpool, the North East and Greater London. Other parts of the country will be able to apply for funding. The Government hopes that it will attract a further £1 billion in private-sector investment.

This announcement is to be welcomed and whilst not explicitly named, businesses in the South East are likely to be significant beneficiaries.

Whilst full details of the Modern Industrial Strategy are not yet known, it is hoped it will address more than just funding. The education and training of the skills needed by high-value technology businesses will take a decade or more to deliver.

Looking further ahead, the R&D tax credit regime should also be reviewed. Whilst some stability within the scheme would be welcome in light of the changes we have seen in recent years, there is a need to ensure that the support is accessible for those who need it. In particular, HMRC’s mandatory random enquiry programme is now making claims harder. For small and medium-sized enterprises (SMEs), the enquiry process can be challenging due to the time, resources and complexity involved in reaching a resolution with HMRC, meaning many simply no longer choose to take advantage of this valuable tax credit.

The funding is welcome and much needed and we look forward to the Government’s full programme of support later this month.

If you have any questions relating to the Spending Review and how it may affect you, please do not hesitate to get in touch.