A new Labour Government – what might this mean for the UK life sciences industry?

Published in February 2024, Labour's pre-election life sciences strategy, "A prescription for growth" (the Strategy) provided an early insight into the new UK Government's ambitions for the sector as part of their broader manifesto mission to achieve economic growth. With successful execution, the Strategy represents a significant opportunity for the sector and could help cement the UK's position as a world-leading life sciences hub.

Here, we explore some of the key initiatives that have been proposed to capture the industry's economic potential and address some of the challenges it faces, including the new Government's broader industrial strategy, the proposed use of the NHS as an innovation partner, improving access to growth capital, other initiatives to support innovation and regulation of innovation and AI.

Industrial strategy

The new Government's broader industrial strategy emphasises stability, economic resilience and robust partnership between government and industry. Aimed at increased continuity across political cycles, a key component of this strategy is the establishment of an independent Industrial Strategy Council (ISC). Comprising of representatives from business, trade unions and academia, the ISC will monitor government progress and strategy effectiveness in priority sectors, including life sciences. 

Sector-specific initiatives are outlined in the Strategy which are aimed at increasing oversight and accountability in government for its delivery. These include:

• reforming the Life Sciences Council, which will report to the ISC;
• placing life sciences and innovation under the Health Secretary's ministerial responsibilities; and
• working with industry to strengthen the Office for Life Sciences to enhance its ability to drive delivery across government.

These proposals are a positive sign that life sciences are intended to receive significant focus within the new Government's broader industrial strategy. This could be a crucial factor in ensuring delivery across the spectrum of initiatives outlined in the Strategy; each of which has an important role to play in strengthening the UK's life sciences ecosystem.

The NHS as an innovation partner

The Strategy outlines ambitious plans to modernise the NHS and make it a better innovation partner through enhanced technology adoption and streamlined regulatory processes. An NHS innovation and adoption strategy is to be developed which will include:

• a plan for the procurement, adoption and spread of new technologies, providing clearer routes for innovators to navigate the NHS adoption process;
• the identification and reduction of unnecessary bureaucracy; and
• reforming incentive structures to encourage innovation and the adoption of new technologies and treatments.

The Strategy also outlines a desire to better utilise the UK's wealth of health data, including through the use of technology. With the establishment of appropriate safeguards, it envisages improved sharing of, and access to, data (including for research) and the development of the NHS app as a comprehensive tool for patient engagement – a "one-stop shop for health information".

The Strategy also commits to implementing the recommendations from the O'Shaughnessy Review including increasing the scope of clinical trials across community settings and GP practices. It also sets out plans to streamline processes and increase participation by creating a national clinical trial registry and utilising the NHS app to improve access.

These bold ambitions for the NHS will be welcomed by industry and the public alike. However, the magnitude of the task cannot be underestimated. With the NHS already under immense funding and operational pressure, the new Government may have a tough – and expensive – challenge ahead if it is to achieve the Strategy's aims. 

Access to finance

With innovation at its core, growth capital is a crucial element of any healthy life sciences ecosystem. Whilst UK biopharma funding has fared reasonably well compared to other jurisdictions amid turbulent times, improving the funding environment is essential for the continued growth and competitiveness of the UK's life sciences sector.

In a bid to address this, the Strategy refers to various proposals aimed at increasing the availability of growth capital. In addition to a broader pension review, this includes:

• the British Business Bank taking on a "more ambitious" remit focusing on growth capital, regional development and streamlining support for SMEs; and
• an opt-in scheme for DC pension funds to invest into UK growth assets, including VC and small cap growth equity (taking inspiration from the French 'Tibi' scheme).

Following last year's Mansion House Compact (the largest UK pension providers committing 5% of their assets to unlisted equities by 2030), any initiatives seeking to continue to unlock UK pension funds to support growth funding would be seen as another step in the right direction. Much will be in the detail – including whether any sectors will be prioritised as part of the plans – but the proposals provide further hope that unlisted UK life sciences companies could benefit from alternative pools of capital in future.  

Other initiatives to support innovation

In addition to NHS reforms and improving growth capital, the Strategy includes a wide range of proposals aimed at addressing other barriers which, in the Government's view, prevents the UK from maximising its innovation potential. These include:

1. Longer-term public funding commitments

Recognising that innovation will often rely on long term investment, the Strategy contains proposals for the implementation of 10-year budgets for funding bodies (such as the National Institute for Health Research) and key R&D institutions. In a sector where R&D activities often span many years, a longer-term funding environment would be a welcome development for the industry.  

2. Increase university spin-out volumes and scale-up success

Noting concerns that high university equity stakes are impacting spin-out growth, an alternative "founder-track" option will be explored which involves universities taking an equity stake of 10% or less, possibly in exchange for providing less support. It is intended that the new Government will work with universities, founders and investors to determine how best to structure this option.

3. Tax initiatives

With an emphasis on stability, the Strategy confirms a commitment to maintaining the patent box regime and indicates that the current UK R&D tax structure will remain over the next parliament. There will then be an evaluation of the R&D scheme on a sector-by-sector basis, starting with life sciences – another positive sign of the intended prioritisation of the industry as part of the Government's broader industrial and economic strategy.

Regulation – innovation and AI

With this new Government, we expect to see a regulatory landscape that prioritises efficiency and direct pathways for technology adoption, particularly within the NHS. They propose the establishment of a Regulatory Innovation Office (RIO) to enable a more coherent approach to regulation across government with the RIO requiring regulators – including the MHRA - to drive innovation and holding them accountable for any delays. The RIO will also guide regulators based on the new Government's strategic priorities which, for life sciences, is likely to include cell and gene therapies, mRNA vaccines and the use of AI in healthcare (being technologies and disease areas they consider the UK should be a frontrunner in).

With AI expected to be increasingly utilised in life sciences, the new Government's approach to AI regulation will have a significant impact on the sector. Labour's pre-election details on AI policy were relatively light but further clarity is expected in the coming months. It is, however, possible that the new Government will take a more regulatory interventionist approach compared to the previous Conservative Government's lighter touch approach to AI regulation. Given the Strategy emphasises the need to encourage innovation and technological advancement both in life sciences and throughout the NHS, the Government will need to strike a balance between robust safeguards on the one hand, and regulation which does not stifle innovation on the other.

Manufacturing and planning

The Strategy confirms support for the previous Conservative Government's allocation of £520 million in funding for life sciences manufacturing over five years from 2025. It also sets out an intention to bring laboratory clusters within the scope of the Nationally Significant Infrastructure regime, with new policies favouring new lab space in the English planning system.

Conclusion

The Strategy provided an ambitious plan for UK life sciences and contains many key elements to help strengthen the existing UK life sciences ecosystem and address certain challenges faced by it. Of course, the plan's success relies on its execution. Industry stakeholders will be keeping a watchful eye on the new Government's development of these proposals now they are in a position to deliver them.