Image Credit: HM Treasury, 2025

The Chancellor of the Exchequer, Rachel Reeves MP, made her Autumn Budget 2025 to Parliament on 26 March 2025. AIRTO – the Association of Innovation, Research & Technology Organisations – welcomes His Majesty’s Government’s continuing prioritisation to drive growth through innovation previously announced in the Spring Statement 2025. In particular, we welcome specific commitments, as follows:

Investment in Research, Development, and Technology

• R&D Funding: Annual government investment in Research and Development (R&D) is set to grow to £22.6 billion by 2029-30. This investment will be strategically focused, with UK Research and Innovation (UKRI) directing £9 billion over four years towards the eight growth-driving sectors (IS-8) of the modern Industrial Strategy.
• Support for Innovative Companies: This includes £4.5 billion dedicated to innovative UK companies in the IS-8 sectors.
• Innovate UK Programmes: Innovate UK will launch a new Growth Catalyst programme worth £130 million, which offers grants and tailored support to frontier companies that have already secured investment.
• R&D Missions Accelerator: UKRI is launching a £500 million R&D Missions Accelerator programme to drive economic benefit from cultural assets and specifically aims to cut construction costs for public infrastructure by 10%.
• Boosting Compute Capacity: The government is investing up to £2 billion between now and 2030 to build a modern public compute ecosystem, which includes over £1 billion to expand the AI Research Resource (AIRR) programme 20 times by 2030.
• AI for Science: The AI for Science Strategy is backed by £137 million of investment over the next four years.

Financial Incentives and Tax Reforms to stimulate greater investment into scaling companies

• Employee Incentives (EMI): The eligibility limits for the Enterprise Management Incentives (EMI) scheme are significantly increased from April 2026. This allows scale-ups (in addition to start-ups) to access the scheme for offering tax-advantaged shares to attract talent. The employee limit rises to 500, the gross assets test to £120 million, and the company share option limit to £6 million.
• Venture Capital Schemes (VCT/EIS): Investment limits for the Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) are to be increased from April 2026 to allow investors to ‘follow-on,’ as companies grow beyond the start-up phase. The company investment limit will increase to £10 million (£20 million for Knowledge Intensive Companies/KICs), and the lifetime company limit will increase to £24 million (£40 million for KICs).
• Capital Markets Competitiveness: A new UK Listing Relief is introduced, providing a three-year exemption from Stamp Duty Reserve Tax (SDRT) for transfers of a company’s securities from the point of listing on a UK regulated market, effective immediately.
• Capital Allowances: A new 40% first-year allowance (FYA) for main-rate assets is introduced from January 1, 2026, to preserve incentives for future investment.
• Advance Tax Certainty Service: A new service will launch in July 2026 to provide major investment projects with advance tax certainty.

Supporting Scale-up and the Innovation Ecosystem

• Skills Development: Training and assessment costs for apprentices under the age of 25 will be completely free for small and medium-sized enterprises (SMEs). This effectively makes the training aspect a “zero incremental cost” to the employer (though other employment costs still apply).
• Financial Institutions: The British Business Bank (BBB)’s new Five-Year Strategic Plan sets a step-change goal to increase its annual capital deployment from £1.5 billion to £2.5 billion. The BBB will invest at least £5 billion in growth-stage funds and scale-up companies and will explore supporting IP-backed lending using its financial guarantee capacity.
• Pension Fund Investment: The BBB intends to launch a VentureLink initiative to help pension funds navigate the UK venture capital market and unlock billions in long-term investment for UK science, technology, and innovation.
• Defined Benefit Pension Reform: The tax charge on surplus defined benefit (DB) pension scheme funds paid directly to members will reduce, enabling funds to be released for wider investment.

Sector-Specific Measures (Automotive/Clean Energy/Defence)

• Automotive/EVs: Funding for the DRIVE35 programme is extended with an additional £1.5 billion to 2035, providing a total of £4 billion over 10 years to support the development of UK zero-emission technology.
• Electric Car Grant: An additional £1.3 billion funding is provided for the Electric Car Grant, extending it until 2029-30, supporting consumers to switch to EVs, thereby driving technology adoption.
• Nuclear: A commitment to implement recommendations of the Nuclear Regulatory Taskforce final report, within two years to accelerate safe and efficient delivery through proportionate regulation and stronger collaboration.
• Defence: A commitment to boost Research and Development (R&D) and innovation via the Ministry of Defence (MoD), including through the upcoming Strategic Defence Review and Defence Industrial Strategy.

Procurement and Market Shaping Reforms to drive innovation

• New Departmental Procurement Champions: Leaders to be responsible for defining and delivering innovation priorities through procurement.
• Innovation Marketplace: An initiative to accelerate access for strategically important innovative firms.
• Advance Market Commitments (AMCs): An AMC has been launched to spur investment in clean concrete technologies and another is pending, worth up to £100 million, for novel AI inference chips.

These commitments reflect the government’s previously stated recognition of the critical role that innovation has to play in driving economic growth and addressing societal challenges.

Earlier this year, AIRTO put forward representation to His Majesty’s Treasury for the second phase of the government’s Spending Review, and more recently we put forward representation in October 2025 calling for growth to be enabled by applied research, development and innovation, highlighting the key policy interventions needed for a clear, consistent strategy to address immediate economic and societal challenges, and build a strong, energy-secure economy.  We also called for improvements to the UK’s regulatory system and better utilisation of public procurement in the government’s role as ‘first customer’ to drive growth and scale-up by optimisation of processes to enable fledgling businesses to win contracts.  Business organisations such as CBI have also called for some of these improvements, and we welcome the Chancellor’s latest announcements as positive steps to advance the implementation of the recently announced Industrial Strategy (Invest 2035: the UK’s modern industrial strategy). Whilst the markets have been cautiously optimistic about the Autumn Budget announcements, confidence from industry in the UK economy remains tentative so the manner of implementation of the new Industrial Strategy going forward will be critical in stimulating industrial partnership for UK growth.

ABOUT AIRTO

AIRTO is the Association of Innovation, Research and Technology Organisations. Its membership comprises fifty of the principal organisations operating in the UK’s innovation, research and technology (IRT) sector. The IRT sector has a combined turnover of £6.9Bn, employing over 57,000 scientific and technical staff (equivalent to the academic staff of the Russell Group of universities) and, for comparison, it is larger than the network of Fraunhofer Institutes in Germany in size and scope of activities. The sector contributes £34Bn to UK GDP.  AIRTO’s members work at the interface between academia and industry, for both private and public sector clients in the UK and overseas. Members cover a very wide range of industries and technologies. These include agriculture and food, pharma and bio, energy generation and distribution, manufacturing and the built environment. They may be industry specific or have cross-sectorial technology and expertise. Members include Independent Research and Technology Organisations, Catapult Centres, Public Research Establishments, National Laboratories or and privately owned innovation organisations.

FOR FURTHER INFORMATION

Please contact: enquiries@airto.co.uk