UK innovation will be undermined by science department Budget squeeze, industry leaders warn

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The government’s pro-innovation strategy will be undermined by a Budget settlement for the Department for Science, Innovation and Technology that will lead to deep cuts to research funding, government insiders and industry bodies have warned.

DSIT is among several Whitehall departments that have been locked in negotiations with the Treasury over their budget for 2025-26, with several ministers sending letters of complaint to Downing Street. 

A person familiar with internal discussions said DSIT’s proposed Budget settlement had thrown the department’s plans for investing in further innovation “into disarray”.

More than 40 research and industry groups have written letters to chancellor Rachel Reeves warning that the resulting reduction in research funding would fly in the face of the government’s promise to invest in innovation in order to boost the economy.

The groups said the challenge had been exacerbated by the Treasury insisting that DSIT must find funds for the UK’s contribution to the EU Horizon science programme from within its budget. The UK rejoined Horizon last September after having left following Brexit. 

Alicia Greated, executive director of the Campaign for Science and Engineering which organised one of the letters, said it was “extremely concerned” at the prospect of DSIT needing to absorb additional costs relating to Horizon Europe without additional money.

“To cover these costs it would require deep cuts elsewhere in the R&D sector. This would lead to the loss of jobs, expertise and momentum right when the sector is needed to boost economic growth and productivity,” she added.

Meanwhile, the health department — the biggest spender in Whitehall — is on the cusp of agreeing its spending plans with the Treasury. Officials described the process between the Department of Health and the Treasury as “not remotely acrimonious”. “On capital [spending], we’re going to be fine,” one added.

Reeves has placed increasing emphasis on the NHS in her first Budget, presenting it as one of three priorities underpinning her spending and tax plans, along with protecting working people and rebuilding Britain.

Other ministers concerned about the impact of budget cuts include Louise Haigh, transport secretary, and deputy prime minister Angela Rayner, whose sprawling department includes housing and local government. 

Council funding, social housing and justice are among areas of Whitehall spending that have been dubbed as “non-protected”, which means they have absorbed deeper cuts over the past 14 years while other areas — such as health — have been ringfenced. 

The CaSE letter to the chancellor from 38 leading research organisations, including the Wellcome Trust, the Russell Group of research-intensive universities and Cancer Research UK, said the plan not to provide extra funding for DSIT was “very concerning”. 

“It would mean deep cuts across other parts of R&D investment, with significant negative consequences for the UK’s world-leading R&D sector, putting the brakes on growth and undermining confidence,” they added in the letter seen by the Financial Times. 

Separately, the National Centre for Universities and Business wrote to Reeves urging her not to undermine the “foundations of the system”.

The letter was signed by leaders of some of the UK’s biggest public companies, including Sir John Manzoni, incoming chair of drinks giant Diageo, and Stuart Chambers, chair of miner Anglo American. The chief executives of chemicals manufacturer Johnson Matthey and quantum computing group Orca Computing were among the other signatories. 

“Businesses are joining together, urging the Treasury to prioritise stable research funding in the upcoming Budget,” said Sam Laidlaw, chair of NCUB and former boss of Centrica, which owns British Gas. “Abrupt funding cuts will have lasting negative effects on the UK’s research and innovation system.” 

The Prime Minister Keir Starmer’s spokesperson said that “engagements between departments and the Treasury and Number 10, head of a budget and a Spending Review, are clearly a standard part of the process where departments will obviously set out their priorities and the challenges that they’re facing”. 

“Not every department will be able to do everything they want to. There will be tough decisions taken, there will be tough conversations,” they added.

A government spokesperson said: “We do not comment on speculation outside of fiscal events.”