Budget 2021: Innovation funding to support the UK’s position as a ‘global science superpower’

Chancellor Rishi Sunak has delivered the Autumn budget 2021 statement, with a target of building a stronger post-pandemic economy for the UK. Of particular interest to us is the government’s focus on science and technology through research & development (R&D) and its recognition of innovation in supporting sustainability to combat climate change:

R&D

Reinforcing the sentiment set out in the Queen’s Speech in December 2019, Sunak commented that a boost in R&D investment will help to “secure the UK’s future as a global science superpower”. A 33% increase (£5bn) to the current research budget of £15bn a year has been announced, and with the majority of this funding planned to come into effect in 2023, this highlights the government’s emphasis on the importance of innovative science and technology businesses in recovering the UK’s economy. £2bn of this £5bn increase has been allocated to the UK’s membership of ‘Horizon Europe’, an EU collaborative research programme which brings together researchers from industry and academic research institutions.

An increased investment in UK R&D to £20bn per year by 2024, as well as a reform of R&D tax relief to support modern research methods on domestic activities, were also announced, but this £20bn sum falls short of the previously proposed (in March 2020) commitment of £22bn per year – a target that has now been pushed to 2026. In addition to supporting UK businesses carrying out research within the UK, a new ‘Scaleup visa’ has been introduced in an attempt to attract highly skilled people from abroad to growing UK businesses. With this new visa scheme, the chancellor announced the launch of a ‘Global Talent Network’ to attract “the best global talent in key science and tech sectors”.

Overall, the total investment in R&D investment will increase from 0.7% of GDP (in 2018) to 1.1% of GDP in 2024, which puts the UK ahead of Germany, France and the US; which once again confirms this government’s emphasis on the importance of adequately supporting science and innovation through funding.

Private R&D investment has also been prioritised, with an increase to £1bn per year by 2024 for core Innovate UK programmes (£300m more per year than in 2021). Sunak has further confirmed the new £800m government funding for the Advanced Research and Invention Agency (ARIA), as proposed in the March 2020 budget.

Sustainability funding

The subject of sustainability and the UK’s impact on climate change remains prominent in this year’s budget announcement, which comes just days before the start of the COP26 summit. The chancellor has confirmed that more than £11.4bn will be invested into a new fund for the government’s net zero strategy in support of “new green industries of the future”, bringing the total invested in the UK’s ‘green industrial revolution’ to £30bn since March 2021. A further £6.6bn will be spent on international climate finance, and the UK Infrastructure Bank (UKIB) will invest £107m in offshore wind in an effort to meet its target of all electricity coming from renewable sources by 2035. A £1.4bn package – the Global Britain Investment Fund – has been designed to encourage investment in the UK’s innovative green and renewable tech sectors, with over £800m of this reserved for the production of electric vehicles.

Alongside these promising steps to reaching a greener economy, Sunak also announced changes to air passenger duty and slashed taxes on domestic flights. The Office for Budget Responsibility predicts a 3.5% increase in passenger journeys a year as a direct consequence of this latest initiative; which has sparked concerns regarding our carbon footprint, especially in the run up to the COP26 summit.  

In an effort to encourage smaller businesses struggling to prioritise sustainability, the chancellor announced an investment relief to encourage businesses to adopt green technology, e.g. solar panels and wind energy. Sustainability and a green economy are only achievable if change is implemented at every level of society – starting with legislation and governmental funding, through to individual households; the Autumn Budget is a step in that direction.

Looking ahead

Through the Autumn budget, the government is highlighting its trust in innovation and R&D as building blocks to becoming a ‘global science superpower’ and rebuilding the UK economy. We look forward to seeing the outcome of such investment and how this will impact the science and technology space.