The UK’s center-left Labour Party won a landslide victory at last week’s general election, ending the center-right Conservative government’s 14 years in office. With new faces at the helm, UK biotech insiders see an opportunity for the country’s life sciences sector to benefit from Labour’s emphasis on economic growth.
Ahead of the July 4 election, Labour published a life sciences plan that laid the foundations of its strategy for the sector. With its win, Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry, said the party must now “hit the ground running” by fleshing out the details of its vision for UK biotech.
Endpoints News spoke with lawyers, consultants and venture capital executives about the implications of the UK’s election results. These included policies designed to encourage more biotech spinouts, the role of pension funds as a source of cash, key ministerial appointments and continued commitment to manufacturing grants introduced by the Conservatives.
Spinout equity proposal not a ‘magic bullet’
One issue on Labour’s roster is the headwinds against life science spinouts despite the UK’s rich academic pedigree. According to the party’s life sciences plan, there were 309 pharmaceutical spinouts in the UK between 2011 and 2023, and it wants to see more.
Labour said it will work with UK universities to encourage them to offer spinouts with a “founder-track” option, in which the institution takes an equity share of 10% or less. Since 2011, UK universities on average owned around 23% of companies at the time of spinning out, according to a Beauhurst report published last year.
Naveed SiddiqiThe founder-track option “would help address concerns that the higher equity stakes taken by UK universities are hampering UK spinout growth relative to other countries,” according to the plan.
But this is only “one piece of the puzzle” for encouraging more spinouts, Novo Holdings senior partner Naveed Siddiqi said. Although the proposal is “helpful,” it’s not a “magic bullet” because founders’ motivations for spinning out research are often more complex than just economic considerations, Syncona CEO Chris Hollowood added.
Also, “a fixed rule” about the percentage of equity may not be right in all cases, UK BioIndustry Association CEO Steve Bates said. For instance, some spinouts may continue to rely on university resources such as lab equipment, while others will require relatively minimal support, he added.
“It’s all very well putting spinouts out, but it’s then funding them — that’s where the sticking point is,” said Alan Boyd, CEO of his eponymous consulting agency.
Pension fund reforms ‘hugely important’
The UK does not have enough venture funds to support the number of biotech companies it has, said Dima Kuzmin, managing partner at London-based VC firm 4BIO Capital. Also, it is challenging for those venture funds that are in the UK to raise capital from the UK, he added.
Dima KuzminThat’s where pension funds could be “hugely important,” Hollowood said. These are large investment pools that collect and manage people’s retirement savings.
As of September last year, the total market value of the UK’s private and public sector pension schemes was around £1.86 trillion, according to the UK’s Office for National Statistics.
In 2000, UK pension funds invested around 40% of their assets in UK equities, but this has now dropped to just 4%, said Simon Amies, a partner at the law firm Cooley’s life science practice. “Something has to change.”
Pensions review has been a bipartisan effort, with the Conservatives kick-starting the work in November last year with their Mansion House Reforms. The first round of investments included a £250 million commitment to “two successful bidders” under the government’s Long-term Investment for Technology and Science (LIFTS) initiative.
Simon AmiesLabour has committed to undertake an even broader review of the pensions landscape and work to enable better consolidation across different pension schemes.
But the problem with using pension funds as a way to support biotech is that they don’t make direct investments and instead work with venture fund managers, Kuzmin said. And even the biggest UK venture funds are too small for the size of investments the funds are looking to make, he added.
As such, it will be necessary to have “creative solutions,” Kuzmin said, adding that these could include “funds of funds.” Labour has said it will set up an opt-in program for defined contribution schemes — a type of pension scheme — to invest a portion of their assets into UK assets, split between VCs, small-cap growth equity and infrastructure investment. The program takes inspiration from the Tibi initiative, implemented by the French government in 2020.
Former GSK exec joins cabinet
On July 5, Labour appointed Patrick Vallance as Minister of State for Science, Research and Innovation. Vallance was head of R&D at GSK from 2012 until 2017, before becoming the UK’s chief scientific advisor under the Conservatives in 2018. During the pandemic, he was a regular on TV screens during press briefings alongside then-Prime Minister Boris Johnson.
Vallance’s experience across both industry and government means “he’s an excellent interpreter between different players in the field,” Kuzmin said.
“I think people are encouraged by the fact that he’s being brought into such an important role,” Amies said.
Vallance is now responsible for innovation strategy, research ecosystems and the UK’s work on Horizon Europe — an EU-wide science research initiative with a €95.5 billion budget — alongside other commitments. So far, he’s told BBC Radio 4 that a relaxation of some visa rules would attract more science talent to the country, despite Labour’s broader commitment to reducing net immigration.
During a G7 meeting in Italy, Vallance also said the UK is planning to bid to host an international scientific research facility, according to a report by the Financial Times, although details are scarce.
£520M manufacturing grants intact
In a point of continuity from the previous government, Labour said it supports the Conservatives’ plan to allocate £520 million in capital grants for the life sciences sector over five years from 2025. That commitment was made in last year’s Autumn budget under the advanced manufacturing plan.
But if the UK wants to become a net exporter of the medical treatments it makes, the cash commitment must be supplemented with other policy reforms related to building planning, Amies said.
Ahead of the election, Eli Lilly CEO David Ricks told the BBC that the UK’s convoluted planning rules put businesses off investing in the country. In its general manifesto, published in June, Labour promised to update national planning policy to make it easier to “build laboratories, digital infrastructure and gigafactories,” although details are slim.
Regardless, it’s a “signal of stability” that the capital grants remain in place, Bates said.
“There was no big divergence from the idea that growing the UK’s life science sector is a key element of the new economy that will be growing in Britain,” he said.
Editor’s note: This article was corrected to note that the total market value of the UK’s private and public sector pension schemes was around £1.86 trillion, not £1.86 billion.