Government Investment Summit: What the Healthcare and Life Sciences Industries Want to See

This article was originally published in Investors in Healthcare.

This week’s Global Investment Summit is the first major indicator of the Starmer government’s approach to investment in key sectors including healthcare and life sciences. Yogan A. Patel, Head of MedTech and Life Sciences at MHA, the UK member firm of the global Baker Tilly network, explores the current landscape and what support the sectors want to see from the new government.

The Current Investment Environment

The UK has a long-standing reputation as a global leader in the healthcare and life sciences sectors. Governments of all colours have recognised the importance of the sector, and there have been several attempts to put a strategy in place for growth and investment.

The most recent comprehensive strategy was the 2021 “Plan for Growth” published by the Johnson Government, although there was an updated life sciences section published by the Sunak Government. The 2021 plan outlined several proposals aimed at fostering continued growth and innovation in these sectors. These included increasing research and development (R&D) tax relief support, procurement reforms, and a pledge to create the “most advanced genomic healthcare system in the world”.

Many saw the 2021 plan as a strong start which recognised life sciences and healthcare technology as potential high growth industries which require government support. However, much of the strategy was never fully implemented due to changes of administration and political instability. This has meant that while successive governments have recognised the importance of life sciences, they did not take enough action to make the industry more investable. Therefore, while the UK is an attractive place to invest in healthcare and life sciences, there is more to be done to reach its full potential.

What Changes does the New Government Plan to Make?

The change of government provides a rare opportunity for a change in approach to investment in and support for the industries.

This week’s investment summit will begin to outline what this approach looks like, and how business feels about it. At present, UK business confidence is slipping due to concerns that tax rises are on the horizon because of what Labour call the “worst economic inheritance since the Second World War”; we can expect a more positive focus on the new government’s political stability and determination to grow at the summit to help boost confidence.

The core of the government’s plans centre around achieving economic growth through “long-term sectoral growth” in priority industries. Healthcare and life sciences are almost certain to be considered priorities, given both have been championed by senior government figures as crucial to growth, and will therefore likely see increased long-term funding.

How the Government Should Develop their Strategy

The upcoming budget will be at the heart of discussions at the summit. While it is promising to see the government putting healthcare and life sciences at the core of their plans already, there are a number of areas where businesses would like to see change in order to create a more attractive investment environment. Here are some of the key outcomes the industry would like to see.

Rewarding Risk: R&D Tax Incentives, Capital Gains Tax & Business Asset Disposal Relief

The government should consider providing additional tax incentives for R&D in the life science and healthcare sectors. This would incentivise companies to take risks and innovate through research, further improving long-term growth in the sector through the development of new technology and providing more opportunities for investment.

Similarly, individuals who invest in healthcare and life sciences projects are subject to capital gains tax, despite the significantly increased risk investing in these industries poses. 

It’s possible that capital gains tax will go up in the budget later this month, as it’s one of the few major taxes the Chancellor hasn’t ruled out raising. This would disappoint many businesses and, many believe, make Britain a much less attractive environment to invest in, particularly for high risk, high reward sectors.

Similarly, there may be plans to scrap or reduce Business Asset Disposal Relief, which entitles entrepreneurs to a reduced rate of capital gains tax when they sell business assets. This is particularly relevant to life science and MedTech businesses, which are often bought out by much larger companies; reducing the reward innovators get for developing cutting edge technology will only deter others from innovating in the future.