Pharma sector backs Labour on R&D, research reveals

79% of pharma businesses believe a Labour Government will have a positive impact on UK innovation while only 6% expect the impact to be negative. 

·         Innovation 5^th largest priority: Compared to other sectors, ‘driving innovation’ is less of a priority for pharmaceutical and life science businesses, who place it 5^th. This is in contrast with the average across all sectors, where it is 2^nd biggest priority.    

·         Friction with HMRC: 23% of pharma and life science firms have had payments from HMRC delayed while 20% say their recent experiences with HMRC has put them off from applying. 

·         Widespread offshoring of R&D: 83% of the industry is offshoring R&D projects in 2024 whereas 44% are doing R&D in the UK. 58% of firms are undertaking R&D activity in Europe. The most popular location is the USA, with 12% of firms doing projects there, followed by Belgium, with 9% doing projects there.  

London, 11^th March 2024: The UK’s pharmaceuticals sector believes Labour would have a positive impact on innovation, according to research based on a survey of 100 industry leaders from innovation funding consultancy, Ayming UK. 

Ayming’s UK Innovation Barometer 2024 reveals that 79% of tech firms think a Labour Government will have a positive impact on UK innovation. Just 6% expect the impact to be negative. 

The UK’s R&D landscape has suffered some setbacks in recent years. HMRC has pursued an aggressive compliance programme in reaction to cases of fraud in the R&D tax credit schemes, causing friction with some businesses. 23% of pharma and life science firms have had payments from HMRC delayed while 20% say their recent experiences with HMRC has put them off from applying. 

Beyond this, there has also been a lack of stability. The UK’s temporary exclusion from Horizon Europe stopped British firms from both receiving funding and being involved in prestigious collaborations. In addition, the last detailed Innovation Strategy was published three years ago and since then there have been two changes of Government, five different ministers responsible for innovation, and the department that published the initial strategy has been disbanded as part of reforms.  

Other key findings include:  

·         Lack of awareness on reforms: Only 43% of pharmaceutical and life science businesses are aware of the reforms to the UK’s R&D tax credit scheme, which is likely to cause further friction once rules change on April 1^st 

·         Funding: On average, the sector is spending 5.4% of revenue to R&D. The most common sources of funding are self-funded and regional grants, with 30% of pharma businesses using these sources of funding.  

·         Mass outsourcing: Half (49%) of pharma firms are outsourcing R&D projects while 44% of companies collaborate with external organisations.  

·         Reasons for offshoring: For pharma firms, the biggest factor influencing offshoring is better IP protections, at 29%. This is followed by collaborating with a company abroad, at 27%.  

·         Obstacles to grant funding: By far the biggest obstacle to grants is the expertise in applying, which is a barrier for 21% of companies. The highest of all the sectors.  

·         Call to digitize tax processes: The most important action for the Government to improve the UK’s innovation landscape is to digitize tax processes and tax credit applications, which 98% say is important.  

·         Call to streamline grant applications: Similarly, the most important action to support Net Zero is to streamline grant applications, with 32% saying it is ‘absolutely critical’.  

Naomi Ikeda, Senior Manager at Ayming UK comments, “Pharmaceuticals and Life Sciences are very R&D intensive. As a result, they have been especially affected by instability of the UK’s R&D infrastructure. There was uproar from the UK’s scientific community when we were excluded from Europe’s Horizon programme. And although we have now rejoined, the temporary exclusion lost firms access to funding and the opportunity to collaborate on cutting edge research. At the same time, the sector is especially dependent on skilled talent and there’s a general recognition that we need to do more to develop homegrown STEM. Our education system needs to be a priority, especially universities.”