The UK Government’s Autumn 2023 Statement – support for life sciences

This article is part of our Biotech Review of the Year - Issue 11 publication

The UK Government has announced significant investment aimed at the life sciences sector in its 2023 Autumn Statement. These investments build on a series of announcements earlier this year focused on delivering the UK Government’s ‘Life Sciences Vision’. A summary of the key policies is set out below.

R&D tax reliefs

The merger of the two existing Research and Development Expenditure Credit (RDEC) and SME tax relief schemes has been under discussion for some time. In the Autumn Statement, the Chancellor confirmed that the two schemes will be merged in respect of accounting periods starting on or after 1 April 2024. The main purpose of the merger is to simplify and improve the UK’s R&D tax relief system. A technical note on specific provisions of the new scheme has been published alongside the Autumn Statement, including further detail on contracted out R&D, subsidised expenditure and externally provided workers.

The Chancellor also confirmed that the notional tax rate applied to loss-makers under the merged scheme would be reduced from 25% under the existing RDEC scheme to 19%. This change will ensure that loss-making companies receive more cash benefit upfront, and will be particularly welcome news for early stage businesses. At the Spring Budget 2023, the Chancellor announced a more generous SME intensive scheme, aimed at the most intensive loss-making SMEs. The threshold to qualify for this additional support was initially met where a company’s qualifying R&D expenditure was 40% or more of its total expenditure. In the Autumn Statement this threshold was reduced to 30%, bringing more companies into the SME intensive category.

Full expensing

The Chancellor has confirmed that after 1 April 2026, UK companies will continue to benefit from the full expensing capital allowance (initially introduced for a fixed three year period following the announcement in Spring 2023) which allows UK companies to deduct 100% of the cost of qualifying main rate plant and machinery from their taxable profits in the year of investment. UK Companies will also continue to be able to deduct 50% of the cost of special rate (including long life) assets from their profits in the year of investment. While not specifically aimed at the life sciences industry, this proposal has been supported by the industry, with the UK’s Bioindustry Association, for example, arguing that it will “make the UK a more competitive location for medicines manufacturing and new R&D facilities, which will strengthen the UK ecosystem.”

University spin-outs

The Autumn Statement recognises that University spin-outs play an important role for the UK economy. With the aim of increasing the number and success of the UK’s spin-out companies, the UK Government has accepted all 11 of the recommendations of its recently finalised ‘Independent Review of Spin-outs’ (Review) and has set out how it intends to deliver them. Amongst the measures announced, the UK Government has set aside £20 million for a new proof-of-concept research funding scheme, to help prospective founders refine and demonstrate the commercial potential of their research. For life sciences spin-outs in particular, the Review endorses a market norm of 10-25% university equity that was recommended by the TenU University Spin-out Investment Terms (USIT) best practice guidance published earlier in 2023.

Clinical trials

In May 2023, the UK Government committed £121 million in funding to meet the recommendations of Lord O’Shaughnessy’s review into commercial clinical trials. £20 million of this funding has now been allocated to launch the first Clinical Trial Delivery Accelerator, focused on dementia. 

Investments in genomics

£51 million of further funding was announced for the ‘Our Future Health’ initiative, which aims to provide the National Health Service with the means to recruit more patients into clinical trials and prevent, detect and treat diseases in the wake of the Covid-19 pandemic. Our Future Health hopes to recruit and genotype more than a million participants from across the UK.

The UK Government also announced support for the ‘Rare Therapies Launch Pad’, a new programme that will develop a pathway for children with rare conditions to access individualised therapies. The programme has been developed by a consortium including Genomics England, the MHRA, Oxford-Harrington Rare Disease Centre, Mila’s Miracle Foundation and the Association of the British Pharmaceutical Industry. The first project will explore the use of individualised therapies known as antisense oligonucleotides to treat children with ultra-rare and life-threatening brain conditions.

Support for life sciences manufacturing

The Autumn Statement also set out the UK Government’s plans to invest £520 million in life sciences manufacturing between 2025 and 2030 with the aim of increasing resilience and UK health security against future health emergencies (further details to be published in due course).