What does Rishi Sunak’s “UK Science and Technology Framework” mean for life sciences investors?

British Prime Minister Rishi Sunak has sought yet again to grab headlines with a pro-science, pro-innovation announcement. Building on his previous creation of a department dedicated to science in a bid to become a science superpower, he has launched a new “Framework” that promises to take “a systems approach to UK science & technology”.  As with his recent Northern Ireland deal, Rishi Sunak is trying to position himself as someone who is in the details of policy.

Critical technologies

The authors of the Framework note that they have assessed fifty technologies against eight criteria, including “health and life sciences”. This has led to “five critical technologies”, to be reviewed annually.

Interestingly for life sciences, only one of these five technologies is in the sector – “engineering biology”, which the Government defines as the “the application of rigorous engineering principles to the design of biological systems”. Other critical technologies such as artificial intelligence and quantum technologies may also prove relevant to life sciences. There is some overlap between these critical technologies and the life sciences technologies within scope of the UK’s NSIA, see below.

Confidence in the UK

Having identified its priority critical industries, the Framework sets out its next ambition as increasing confidence among UK stakeholders. This goal focuses more on attitudes and promoting investors’ perceptions of the strengths of the UK’s ecosystem, rather than specific policies. It comes amid increasing pressure on the Government to prioritise the sector, both from former political heavyweights like Tony Blair and William Hague as well as the opposition Labour Party. 

Research & Development

A primary stated aim of the Framework is to increase private sector investment in R&D. There is a recognition that public sector investment will be helpful in leveraging private funds. In its notes to the Framework, the Government states that it is continuing “to listen to stakeholders about the recent changes to R&D tax credits”.

As we recently noted, the Government is currently undertaking a consultation on changing the UK R&D tax credits regime, principally by consolidating the two different forms of credit currently available for SMEs and larger companies into a single R&D tax credit. This consultation follows cuts to the more generous SME tax credit announced last year to more closely align the rates of the two credits, which have received some criticism.  It remains to be seen what form the final proposals will take.

Talent and skills

The Government recognises that investment in R&D alone is not enough to build the life sciences industry. Part of the Framework includes commitments to expand STEM education in schools and universities, building on the recognition of the importance of particular university clusters.  There is also a promise to offer “easy access” to the world’s best talent through the ‘high-skilled visa system’. This will likely be welcomed by the sector, as international competition for the relevant expertise remains a key gating item to building any new (or existing) company, although more detail is still needed.

Financing companies

In answering the question of how innovative science and technology companies will be financed, the Government has repeated a number of recently announced policies:

• There is a call to open financial (public) markets and make the UK more competitive with the US - implementing the recommendations of the Hill Review.
• There is a desire to encourage more UK institutional investors to back these companies, particularly in removing perceived barriers preventing defined contribution pension funds from participating.
• There is a more general aim of ensuring a greater number of spin-outs as well as addressing regional disparities.

The Framework falls short of the new Lord Mayor’s calls for a new sovereign wealth fund to financing British “unicorns”, backed by British pension funds. This comes against the backdrop of the opposition Labour Party’s proposed creation of a new government fund to invest in clean energy as part of their Industrial Strategy.

International opportunities

Consistent with much of the Government’s post-Brexit rhetoric, the Framework focuses on the opportunities for the UK to build international partnerships (such as in the G7 and G20). Science and technology are seen as ways to strengthen (and can be supported by) the UK’s global influence.

Interestingly, the Framework itself does not make reference to the EU’s “Horizon Europe”, although the announcement itself confirmed a further extension of financial guarantees until 30 June 2023 for UK applicants. We have recently discussed whether Rishi Sunak’s “Windsor Framework” on Northern Ireland would pave the way for the UK’s re-entry. However, since then, the Government has been more equivocal whether it will pursue this.  Nor does the Framework reference the Government’s recent science cooperation agreement with Switzerland.

The Government also sets a slightly cautious tone in “weighing the security risk of open collaboration and investment against the opportunity cost of limiting them”. Earlier this year marked one year since the UK's National Security and Investment Act 2021 (NSIA) came into force. As we noted, the Government has used its new powers to block several transactions, many of which are related to its “critical technologies”.

Physical and digital infrastructure

There is a recognition that an increasing scientific sector will need increased infrastructure to support this expansion. Although not specifically referenced, there is a clear understanding that more laboratory space will be required. This tracks existing private sector moves to convert office space. The Framework is light on details at this stage, promising to set out a future plan.

Regulation and standards

Rishi Sunak’s Government is keen to find benefits to Brexit and cites the ability to leverage the UK’s new-found agility to develop “pro-innovation” regulation. As previously noted, various efforts towards this objective are already underway. These include attempts by the UK to relax the current rules on scientific research and public sector data.

Most recently, in response to the Life Sciences Council’s Joint Statement on Medical Devices Regulatory Reform, the newly established Advisory Group issued a number of proposals designed to create a “best-in-class regulatory system” in the UK. Certain proposals are aimed at accelerating the route to market by, for example, relying on the decisions of other trusted regulators, and further developing the Innovative Devices Access Pathway.

The Framework sits alongside these efforts and further reinforces the Government’s resolve towards the realisation of its aim to be “at the frontier of setting technical and standards and shaping international regulations”.

Conclusion

Many of the specific proposals had already been announced, and much of the rest of the Framework is very high level. As a result some life sciences investors may be disappointed at the lack of new policies to support the industry. That said, the Framework does represent a clear further attempt by the UK to be a leader in the sector and provide long term certainty by tying together a range of policies.