Joint article by Tom Elliott, Chief Executive Officer of Medilink North of England and MHA one of our Corporate Partners.
The Chancellor’s Autumn Budget 2025 sets out a fiscally cautious yet strategically significant framework for the UK economy. For the life sciences sector, the message is clear: while government support for innovation remains strong, businesses must prepare for a challenging operating environment marked by rising costs and tighter financial conditions.
Continued Commitment to R&D and Innovation
We welcome the government’s reaffirmation of its £20 billion public R&D funding commitment for 2025–26 and the UK’s full participation in Horizon Europe. The Life Sciences Innovative Manufacturing Fund (LSIMF), unlocking up to £520 million for advanced manufacturing, is a positive signal of long-term support for our sector. Additionally, reforms to investment schemes, such as increased limits for Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs), will help scale-ups attract growth capital, particularly knowledge-intensive businesses like biotech and MedTech.
Cost Pressures and Workforce Challenges
However, the Budget introduces measures that will increase the cost base for many organisations. Employer National Insurance rises, frozen income tax thresholds, and higher business rates on high-value properties will disproportionately impact companies operating expensive laboratory and R&D facilities. Inflationary pressures on salaries—especially for scientific and regulatory roles—compound these challenges. For businesses where staffing accounts for 50–70% of total expenditure, workforce flexibility and strategic planning will be essential to maintain competitiveness.
Investment Climate and Global Competitiveness
The extension of venture investment tax incentives and employee share option schemes will support scale-ups. However I am concerned by rising operating costs and the risk of deterring inward investment. Stability and clarity in R&D tax reliefs are critical; while no major changes were announced this year, businesses need confidence in a multi-year framework to plan innovation programmes effectively.
Opportunities for Collaboration and Growth
The Budget’s emphasis on AI and digital infrastructure aligns with the sector’s trajectory toward decentralised clinical trials, telehealth, and interoperable data systems. These developments present opportunities for life sciences businesses to lead in digital health innovation, provided policy and regulatory frameworks evolve to support adoption.
MHA highlights – This was a confident and bullish Budget from the Chancellor, aimed at satisfying Labour backbenchers, prioritising long-term investment, and reassuring the financial markets.
Bond yields rose slightly following the leaking of the OBR’s forecasts, but calmed throughout the Chancellor’s speech. In her raft of investment announcements, the Chancellor hasn’t chased short-term, instantaneous boosts to the economy, instead focusing on longer-term initiatives regarding infrastructure and transport.
So far, so good. The financial markets appear content. An increase in tax revenues has given the Chancellor a more comfortable fiscal headroom of £20bn. However, the OBR and Treasury disagree in their forecasts for the public finances.
According to the OBR, annual borrowing is set to fall from 4.5% of GDP this year to under 2% by 2030. However, the OBR projects national debt as a share of GDP to rise from 95% this year to 96% in 2030 — this would mean the Chancellor does not meet one of her fiscal rules. The Chancellor seems to disagree, announcing that this share will be falling by 2030. Who are we (and the markets) meant to believe?
This has been termed a ‘cost-of-living’ Budget — those with ‘the broadest shoulders’ are certainly bearing the brunt. The surcharge on properties valued at more than £2mn, a two-percentage point tax increase on dividends, and restrictions to salary sacrifices in pensions will hit higher earners.
Yet, has the Budget actually helped put money in people’s pockets in the short-term? Not really. The continued freeze on income tax and National Insurance thresholds, extended until 2030/2031, will drag many more earners into paying higher rates of tax. The above-inflation increase in the minimum wage is good for low-paid workers who happen to be in work, but this may disincentivise hiring at a time of high youth unemployment and economic inactivity.
It is clear that this is not a Budget to provide an instant boost to economic growth. The OBR has upgraded growth this year from 1% to 1.5%, and the Chancellor expects the economy to grow at an average of 1.5% a year across the lifetime of this Parliament, despite the OBR’s downgrading of productivity improvement from 1.3% to 1% a year. These projections would see the UK grow modestly compared to long-term trends — and could always be knocked off track by unforeseen events and external shocks. The margin of error is small.
With inflation falling but remaining high, the Chancellor was cautious not to reignite any inflationary pressures — freezing fuel duty (for now) and rail fares, as well as providing energy bill relief. While the rise in minimum wage in the absence of productivity improvements may have some inflationary effects, we can still expect the Bank of England to cut interest rates when the Monetary Policy Committee meets on 18th December.
UNPACKING THE CHANCELLOR’S ANNOUNCEMENT
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