Autumn Budget UK: Record R&D Investment for UK Innovators

On 30th October, Chancellor Rachel Reeves announced the UK Government’s Autumn Budget, Labour’s first in 14 years. 

The 170-page report outlines the Government’s plans to ‘fix the foundations of the economy to deliver change’, and to put the public finances on a more sustainable path. 

As the dust settles on the announcement, and ahead of the rush to finish the year strong, Grantify’s experts have identified the report’s key takeaways for UK innovators, and what the implications for innovation funding might be. 

(Spoiler alert: it’s good news.)

Probably the most promising announcement was a £20.4 billion investment in UK R&D - the highest-recorded level of government investment in the sector - aiming to support the UK’s R&D ecosystem to drive economic growth and achieve its five national missions.

This includes a commitment to fully funding the UK's association with Horizon Europe, the EU's flagship research and innovation program, which will provide access to over £80 billion in research cooperation funding, opening up significant opportunities for UK institutions and businesses.

A new £25 million R&D Missions Program will also be introduced in 2025-26 to tackle targeted issues, with regional Innovation Accelerators supporting growth across the country. These accelerators will aim to bolster high-potential innovation clusters in the Glasgow City Region, Greater Manchester, and the West Midlands.

This mission-driven approach to innovation has the potential to support truly impactful solutions to some of our most pressing challenges. 

Life sciences continue to be a cornerstone for positioning the UK as a leader in science and innovation, with a £520 million (£70m in 2025-26) commitment to the Life Sciences Innovative Manufacturing Fund. This will seek to unlock £1.8 billion in private investment, advance health resilience and create high-quality jobs.

Several other key sectors will see investment in R&D, including £975 million over five years for the aerospace industry, and £2 billion in R&D and capital funding for the automotive sector.

These investments demonstrate the government’s understanding of the need to invest heavily in innovation to drive the UK’s competitive edge on a global scale - this is a positive signal from the government for startups seeking innovation grants.

Technologies that protect the environment and combat climate change also received a major boost.

£58 million has been allocated across 2024-25 and 2025-26 for research and innovation related to climate resilience and net zero goals, highlighting the priority placed on addressing the challenges of climate change.

£350 million will be provided to Energy Intensive Industries across 2024-25 and 2025-26 to support improvements in energy efficiency, decarbonisation, and technological innovation. £163 million of this will be provided through the Industrial Energy Transformation Fund.

Ed Matthew, campaigns director for thinktank E3G, welcomed the news:

"It is clean technology where our future prosperity lies, boosting productivity, making us competitive and weaning us off expensive and volatile fossil fuels. It’s the economic opportunity of the century.”

Not every measure was roundly positive, with hikes in Capital Gains Tax (CGT) and National Insurance contributions likely to impact on growing startups looking to scale headcount.

CGT is set to rise incrementally, from 10% to 18% at the lower level by April 2025, and 20% to 24% at the higher rate. 

Specific types of CGT that will impact investors and business owners will also increase, including Business Asset Disposal Relief (BADR) and Investors’ Relief (IR), which allow some business owners and investors to pay a reduced rate on profits from selling their shares or assets. 

From April 6 next year, the tax rate for both BADR and IR will increase to 14% from 10%, increasing again to 18% on April 6, 2026.

techUK CEO Julian David said in response:

“We are pleased to see that the Chancellor has acted on recommendations from techUK’s Growth Plan that will help drive business investment and productivity increases in the medium term.   

“However, heavy tax rises on businesses will have an impact now and come before seeing the Government’s complete offer on growth.”  

While the full details of these funding commitments will emerge through the Phase 2 Spending Review, the outlook is positive for UK innovators seeking funding in key areas of focus.

According to the Office for Budget Responsibility, the UK’s economy is expected to grow by just over 1 per cent this year, rising to 2 per cent in 2025, before falling to around 1½ per cent, slightly below its estimated potential growth rate of 1⅔ per cent, over the remainder of the forecast. 

This Budget fixes the envelope for Phase 2 of the Spending Review, which will deliver a new mission-led, technology-enabled, and reform-driven settlement for public services, concluding in late spring 2025.

The full details of these funding commitments will be teased out during this process and we will have to wait to see how each measure is taken forward, but we can assume the government will be seeking to support innovation projects.

Grantify senior funding consultant, Stephanie Ward, said:

“There is a general feeling of positivity for research, development, and innovation funding in the coming years. With an ever-changing economic landscape, it is good to see that the government recognises the crucial role innovation has in driving economic growth.

“If you are innovating in the UK, there could well be some exciting opportunities ahead to accelerate the development of your projects.”