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Budget 2018: UK life sciences sector delivers its verdict

Budget

UK Chancellor Philip Hammond delivered a budget that was broadly pro-business but contained mixed news for the life sciences industry, according to two industry bodies.

The headline news of an additional £20bn in finding for the NHS should be a benefit to companies in the pharma and healthcare sectors, particularly those contracting into the NHS, and was welcomed by Association of the British Pharmaceutical Industry (ABPI) chief executive Mike Thompson.

“We welcome the additional funding confirmed for the NHS,” he said, adding he is also pleased with the news that more money will be made available to support companies in the event of a ‘no deal’ Brexit – which would prompt another full budget next spring.

The government says it will provide the British Business Bank with the resources to make up to £200m of additional investment in UK venture capital and growth finance in fiscal 2019-20, with another £500 million held in reserve.

“Pharmaceutical companies are doing everything in their power to prepare for every potential Brexit outcome and the money is an important recognition of the scale and complexity of that task,” said Thompson.

The BioIndustry Association (BIA) also welcomed the extra NHS and Brexit money, as well as a project led by the British Business Bank to explore options for pooled investment by pension schemes in ‘patient capital’ – in other words long-term investments with no expectation of turning a quick profit – that suits the biotech model.

It has concerns, however, about proposed changes to R&D tax credits. In particular, restrictions imposed from 2020 that could see caps introduced for “many small bioscience companies, especially those that outsource R&D,” says the BIA in its report on the budget.

Changes to the new Entrepreneur’s Relief system, designed to help startups, do little to address some fundamental problems with the scheme, but reductions to corporation tax, support for investment in facilities and raised funding for the Industrial Strategy Challenge Fund – which supports public spending on research and innovation – were greeted as positives.

Overall, Hammond’s trumpeting of an “end to austerity” signals a departure for the Conservative government as it represents a modest return to spending after years of cutbacks, although the Chancellor stressed there would be no gains for departments other than the NHS.

With that included, public spending will rise by 1.2%, he told the BBC’s Today programme, but other public services – local government, schools, police, the armed forces etc – will continue to be squeezed with “flat real spending available.”

In response, Shadow Chancellor John McDonnell said it is “now clear austerity is not over, the cuts to social security will continue and Philip Hammond gave no assurances that departments won't face further cuts.”

The picture for other functions critical to healthcare – such as social care, public health, and medical and nursing education and training – won’t be clear until next year’s Spending Review.

Meanwhile, the impact of the Chancellor’s pledge to bring the Private Finance Initiative (PFI) of public-private partnerships to an end is another big unknown for the NHS. Vilified in some quarters for locking the health service into crippling payment contracts spanning years or even decades for capital projects, their demise will be welcomed by some, but raise questions as to what will replace them.

Commenting on the overarching theme of the budget, Investec’s Richard Holm said: "This should go some way towards lifting the general economic mood, although probably still pales in insignificance for most small companies compared to the potential consequence to their business in a no-deal Brexit scenario.”

He continued: “As much as the Chancellor has reported a healthy economic status and delivered a confident, pro-business Budget, this is likely to have little serious benefit on the economy at large until the uncertainty of Brexit is behind us.”

Article by
Phil Taylor

30th October 2018

From: Healthcare

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