Autumn Budget 2025

Policy context: an innovation ecosystem under strain

Despite public commitments to supporting innovation, many UK businesses still face significant barriers when trying to fund growth.

As Ele Theochari, Partner notes:

The Government is unlikely to bring in any changes to R&D tax relief schemes in the Autumn Budget, but more needs to be done to reward innovative businesses, particularly in a climate of increasing employer taxes, higher capital gains tax, and diminishing rates of relief when a business is sold.

While the UK’s R&D tax relief system remains one of the main policy tools to support innovation, rising costs and complex compliance requirements mean that many small and mid-sized firms see little tangible benefit. For growing companies in technology, life sciences or manufacturing, this combination of high tax burden and limited incentives risks stalling investment.

Funding bottlenecks: a system too slow for fast-moving businesses

The grant and direct funding process should be made easier and more efficient: the rates of success when applying for a grant is extremely low, and the process itself is slow and laborious. This makes the cost for businesses, especially small ones with less administrative resources, greater than the grant they might receive.

In an environment where agility is essential, overly bureaucratic funding processes can make the difference between scaling up and standing still. A simplified grant application system – supported by digital tools and clearer guidance – could make government support more accessible and effective for small firms.

The talent gap: rethinking apprenticeships to build future skills

A shortage of technical talent remains one of the biggest constraints on innovation-led growth. The Government’s apprenticeship levy, originally designed to boost skills investment, is often criticised for being too rigid.

New industry talent should be supported by increasing the number of science, technology, engineering and mathematics (STEM) apprenticeships. Reforming the apprenticeship levee system to make it less restrictive would encourage businesses to provide apprenticeships and make them more rewarding for apprentices.

With vacancies in STEM-related roles consistently outpacing supply, reforming the levy could help employers invest more flexibly in upskilling and attract new entrants into high-demand sectors.

Mobilising private capital for innovation

Beyond public funding, attracting private investment into innovation remains a critical challenge.

Private capital needs to be mobilised for R&D by more co-investment schemes or innovation funds. This would make it easier for private individuals to invest in small start-ups who need capital to get their innovations off the ground.

By expanding matched-funding initiatives or offering targeted tax incentives for early-stage investors, the Government could unlock significant private capital. For high-potential start-ups, this could mean the difference between commercialising breakthrough technologies in the UK or relocating elsewhere.

Building a pro-innovation environment

Innovation policy is not only about funding – it’s about creating an ecosystem that allows ideas to flourish.

The Government should provide a pro-innovation regulatory environment that makes it easier to test and scale new ideas. This must involve encouraging R&D activity across the UK, not just in London and the South East.

Ele concluded:

We already have the Advanced Research and Invention Agency (ARIA) and Industrial Strategy Challenge Fund (ISCF), but more should be done to encourage greater collaboration between academia, industry, and government to leverage combined resources for R&D projects.

Regionalising innovation support could help spread opportunity and growth more evenly across the UK – something policymakers have long championed but struggled to achieve in practice.

Why it matters

A Budget that prioritises innovation is not just about helping high-tech start-ups. It underpins productivity growth, job creation and long-term economic resilience. Without easier access to finance, flexible skills pathways and supportive regulation, the UK risks losing its competitive edge to economies with more agile innovation systems.

What businesses should consider next

With the Autumn Budget approaching, businesses should:

Review their R&D position – ensure claims and documentation are robust under current rules, and assess eligibility for innovation grants.

Reassess apprenticeship and training strategies – identify opportunities to build STEM capability internally or through partnerships.

Explore private funding routes – look into co-investment funds or investor networks that align with government-backed schemes.

Engage with consultation processes – provide feedback to HM Treasury or industry bodies to help shape policy design.

If the Government can make meaningful progress on these fronts, the upcoming Budget could mark a turning point for UK innovation and growth. Until then, the message from businesses is clear: the time for incremental tweaks has passed – the UK needs an environment where ideas can thrive and scale.

Would you like to know more?

If you would like to discuss the above matter, please get in touch with your usual Blick Rothenberg contact, or Ele Theochari using the form below.