Autumn Budget 2025: what does recent government policy mean for UK life sciences and healthcare?

The Autumn Budget 2025 continued to emphasise the centrality of the life sciences sector to the government's "growth first" Industrial Strategy, which had already positioned the life sciences sector as one of eight growth sectors. Rather than a dramatic reset, the Budget highlighted a number of funding and policy announcements already laid out in the 2025 Life Sciences Sector Plan and related announcements.

For companies across the sector, the tangible effects are expected to be seen in the speed and clarity of clinical and market access pathways, a steadier public research and development (R&D) pipeline, improved health-data access, targeted manufacturing support and a gradually deeper pool of growth-stage capital. These prospects have been substantially enhanced by landmark UK-US pharmaceutical deal which secures exemptions from US import tariffs among other favourable measures. However, these sit against several friction points around increased business and tax rates.

NHS funding, modernisation and medicines costs

The government confirmed days before the Budget that the NHS will receive £300mn of additional capital investment in healthcare technology to boost productivity and improve patient outcomes. The Budget suggests 2% per year productivity increases would unlock a stated £17 billion of savings in England over three years, which is to be reinvested in the health service. This builds on the £10 billion announced at the Spending Review 2025 to ensure "seamless navigation and communication" between primary and secondary care via the NHS App.

This investment programme sits alongside other ongoing government initiatives aimed at improving the productivity and efficiency of the NHS. These include abolishing NHS England, cutting down on Integrated Care Board costs and reducing duplication – through which the government aims to release £1 billion annually by the end of the Parliament, alongside a 30% cut to agency staffing.

The government also announced 250 additional neighbourhood health centres (120 to be operational by 2030), which will co-locate local health services, such as GPs and physiotherapists. These are to be delivered through the NHS Neighbourhood Rebuild Programme, which will upgrade and repurpose underused buildings and build new facilities through a combination of public investment and public-private partnerships.

The Budget also gave further attention to another initiative in the Industrial Strategy: the use procurement to drive innovation. This is not an NHS specific strategy – each government department will need to appoint a senior procurement innovation champion. To accelerate access for strategically important innovative firms, the government plans to launch an innovation marketplace to remove internal barriers to innovative procurement. The NHS is a likely target with this initiative, which potentially creates innovation-friendly routes to market for NHS suppliers.

Although not mentioned in the Budget itself, the Office for Budget Responsibility (OBR)'s economic and fiscal outlook report anticipated that there would be increased NHS spend on branded medicine, depending on the outcome of negotiations with pharmaceutical companies, which broke down earlier this year.

However, following strong calls from industry to rise cost-effectiveness thresholds at which new medicines are assessed for use by the NHS, the government agreed a landmark UK-US pharmaceuticals deal on 1 December to drive pharmaceutical investment, generate job opportunities and secure access to medicines access for NHS patients.

The reported measures agreed include 0% tariffs on UK medicines to the US, a 25% increase in medicine pricing for branded medicines as well as a reduction in the rebate tax that pharmaceutical companies pay the NHS from 23% to 15%.

R&D investment

The UK government R&D spend will grow to £22.6 billion by 2029-2030 and focused on investment priorities, with the UK Research and Innovation (UKRI) directing £9 billon over four years to the eight growth sectors in its Industrial Strategy (including life sciences), with £4.5 billion earmarked for innovative UK companies in those sectors.

Engineering biology, a frontier industry in the strategy, will see an increase in funding to £644 million. This follows regulations relaxing the rules around gene editing, technology which is foundational to the engineering biology industry, entering into force in early November.

With the wider government focus on promoting small and medium sized enterprises (SMEs), the Budget announced a targeted R&D advance assurance service that will be piloted from spring 2026. It will enable SMEs to get clarity on key aspects of their R&D tax relief claims before submitting them to HMRC.

Regional clusters

With a focus on regional investment, the Budget highlighted the previously announced £30 million of "next gen" therapy funding for a new facility based in Darlington to accelerate the development of novel RNA (ribonucleic acid) therapies. There was also newly announced separate funding for a Darlington STEM (science, technology, engineering and mathematics) centre – a mission-driven skills pipeline supporting adjacent health and biotech needs.

The Budget also featured the earlier announcement of a £50 million award earmarked for the Glasgow City Region through the Local Innovation Partnership Fund, which will sponsor spin-out and scaling of firms in innovation clusters focused on areas such as medicine, biotech and quantum computing.

Advanced manufacturing was named as the sector focus for the Enhanced Investment Zone in Northern Ireland, targeting clusters in photonics and biotechnology. The Department for the Economy in Northern Ireland expects it to leverage over £230 million in private investment over the next 10 years.

 Skills, talent and mobility

Aligning with the Industrial Strategy, the Budget broadens the High Potential Individual visa to graduates from top‑100 universities, streamlining the Innovator Founder path for international students transitioning into entrepreneurship, and simplifying access to global talent – facilitated through a Global Talent Taskforce. Coupled with UKRI’s £4 million Enterprise Fellowships and up to £25 million for entrepreneurship‑focused doctoral training, the measures should strengthen translational leadership in early‑stage companies. A new round of Women in Innovation Awards (£4.5 million) is also proposed. 

The Budget also provides for a new international student levy (for 2028-2029) of £925 per international student per year, with an allowance for the first 220 students per provider. Proceeds will be reinvested into higher education and skills. This could have a financial impact on universities heavily reliant on international fee income, with indirect effects on research staffing and postgraduate pipelines across science-based courses.

Start-ups and scale-ups

With financing and scaling up already under the spotlight with the Lords Science and Technology Committee report in early November describing a "science and technology growth emergency", scale-up funding received attention in the Budget. The British Business Bank (BBB) will invest at least £5 billion in growth-stage funds and scale-up companies. The government has also asked the BBB to explore using its existing financial-guarantee capacity to support intellectual property-backed lending.

Additionally, the Budget significantly increases the eligibility for enterprise management incentives (EMI) to allow larger scale-ups and start-ups to access the scheme from 6 April 2026. For eligible companies, the changes that will apply to EMI contracts granted on or after 6 April 2026 are: company options will be increased from £3 million to £6 million; gross assets will be increased from £30 million to £120 million; and the number of employees will be increased from 250 to 500 employees. 

The change will apply to EMI contracts granted on or after 6 April 2026 and can also apply retrospectively to existing EMI contracts that have not already expired or been exercised. The limit on the exercise period will be increased from 10 to 15 years. Existing contracts can be amended without losing the tax advantages the schemes offer, provided it is in line with the legislation. This will be good news for smaller, fast growing life sciences businesses, particularly as it can help attract senior scientific and commercial talent in a competitive market.

Regulatory and market changes

Following prior announcements to simplify regulation and improve regulator performance, the government will reform the "growth duty" statutory measure to make legal frameworks clearer and more focused and to ensure that regulators promote growth. The government is also consulting on a cross‑economy artificial intelligence (AI) "growth lab" and other sandboxes enabling carefully supervised deployment of responsible AI applications.

The Budget also focuses on bridging the gap between regulation and innovation, highlighting activities already underway. For example, backed by Research Innovation Office funding, the Medicines and Healthcare products Regulatory Agency (MHRA) is piloting AI-assisted tools to support scientific advice, clinical trial assessments and licensing while keeping decisions human-led. Businesses in the sector should ensure their preparedness for MHRA transformation as AI-assisted assessments may potentially affect clinical trial and licensing timelines.

Osborne Clarke comment

While the Budget positively affirms the government's continued focus on life sciences as a priority growth sector, many of the announcements were not new and followed the direction of travel set out in the Life Sciences Sector Plan and other recent announcements. Further funding announcements, both from government and other sources, have already followed the Budget and can be expected to continue.

Significantly, the UK-US pharmaceutical deal will provide an additional boost to the sector, with enhanced NHS medicines pricing and reduced industry taxation aimed at securing favourable trade terms and exemptions from US import tariffs.

The government clearly does not want to lose ground in the race for global scientific leadership. Several days before the Budget, the government announced its new AI for Science Strategy, which will provide additional funding to develop frontier capability in AI-driven science. The strategy is centred around developing a data landscape that facilitates transformative research, ensuring the right researchers have access to compute resource at sufficient scale, building research communities comprising interdisciplinary teams and ensuring that the UK capitalises on rapid developments in autonomous laboratory infrastructure and general-purpose and specialist AI science tools. An initial mission will focus on accelerating drug discovery to develop trial-ready drugs within 100 days by 2030 and contribute to deploying new treatments faster.

While some measures, such as increased funding for R&D, greater support for scale-ups, modernisation of the NHS and increasing AI adoption to deliver innovative products to market quicker, have been received positively by industry, there are still concerns around increased business operating costs in the sector, which could affect, for example, the cost of running laboratory facilities, as well as have tax implications.