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• Predictability and stability are key drivers of business growth.
• Leaving the core R&D schemes untouched is one of the most meaningful outcomes of the Budget. The Advance Assurance pilot, which will let businesses know the likelihood of a success before they commit a lot of time to an application, is also promising.
• Missed opportunities such as digitalisation and a lower ERIS threshold will hold businesses back.

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This year’s Budget was shrouded in debate about tax rises and household pressures, yet the narrative for UK innovators is far more complex. Beneath the political noise lies a shift that matters deeply to scaling businesses: the return of predictability, stability and the footings for long-term growth. 

Companies investing in research, talent, and commercialisation have endured several years of change to relief schemes and compliance requirements, so for many of them, stability is essential for long-term planning.

Rachel Reeves’ declaration that the UK government would back those building in Britain offered encouragement, however the attention must now turn to how that looks in practice if we’re to truly back those who are driving meaningful innovation and helping to fuel the economy. 

Why stability in R&D tax schemes matters 

After being subject to several changes in recent years, the decision to leave the core R&D schemes untouched is one of the most meaningful outcomes. RDEC, ERIS and the PAYE and NIC cap remain in place with no sudden adjustments or new layers of uncertainty.

For leadership teams trying to map multi-year investment plans, this continuity is highly valuable and allows for a company designing new technology or expanding its technical teams to begin forecasting with more confidence. The risk of policy changes landing mid-project has been a major inhibitor of ambition in recent years. When we surveyed UK businesses, over half (52 per cent) stated that regulatory complexity is the biggest barrier preventing R&D efforts, so the absence of new disruption is welcome.

It’s promising that additional clarity is on the horizon through HMRC’s Advance Assurance pilot, scheduled for Spring 2026. This early-stage validation will give qualifying companies an indication that their work meets R&D criteria before they commit extensive time and resources to a full claim. The process will not eliminate the valid scrutiny that HMRC has on claims, having been burdened by bad actors seeking an easy payout, but it will make compliance more transparent and more predictable. 

Innovators that document their technical work thoroughly and adhere to guidance will enter a far more straightforward relationship with HMRC, while others will find the bar raised as part of an intentional shift toward higher quality claims, something we fully support. 

Restored belief that the UK can win

Alongside this stabilisation comes a clearer picture of where the government believes the UK can excel globally. New initiatives such as the Growth Catalyst Fund reflect a more intentional approach to public investment, supported by sector-specific commitments in life sciences, automotive, aerospace and the creative industries that serve as indicators of national priority. Each of these fields offers a realistic path to leadership in areas where the UK already demonstrates deep expertise, established research networks or competitive industrial advantages.

This form of targeted funding moves away from the broad distribution of earlier innovation programmes and concentrates resources where it deems the probability of global success is highest. HMRC’s own annual R&D claims data revealed that manufacturing emerged as a sector investing heavily in R&D, second only to information and communication.  

For companies operating in these selected sectors, the combination of direct investment and ongoing R&D relief form a powerful launchpad for growth. For those building outside the chosen areas, R&D relief should not be overlooked and instead become even more central. These firms rely heavily on a consistent and dependable tax credits system, and the budget’s decision to keep the framework stable reinforces the importance of reliefs as the foundation of the country’s innovation support.

Why robust, compliant claims matter more than ever

The government is proactively trying to re-establish predictability and stability for innovators, and this should be replicated by innovators themselves. Tax relief for investment in genuine R&D activity will remain accessible, but only when supported by robust, technically credible submissions that align with the intent of the legislation. 

Compliance standards are likely to be further tightened as HMRC filters out those making false claims, so companies that previously relied on broad interpretations or weak documentation will encounter significant friction in the form of enquiries and repayments. Those who invest in rigorous processes will benefit most from the new environment. Their claims will be processed more smoothly, and their ability to scale will face fewer administrative interruptions.

Where missed opportunities could slow momentum

While the budget offers clarity, it also leaves several opportunities to facilitate growth. For example, a lower ERIS threshold would have opened the door for a wider range of early-stage innovators as many of these firms operate at the frontier of new technologies but lack the scale to meet current requirements. Meanwhile, the UK’s R&D credit rates continue to trail behind those of international competitors. We saw Ireland increase the rate of R&D credits just months before the Chancellor’s statement, leaving a gap that risks pushing globally mobile R&D investment toward jurisdictions with more generous regimes. Several of the UK’s most advanced sectors rely on long investment cycles, and a more competitive rate structure would significantly strengthen their ability and appetite to plan long term. 

The decision not to make full expensing permanent introduces another layer of uncertainty as capital-intensive companies, particularly those in manufacturing, robotics and energy systems, depend on predictable treatment of major investments. A permanent structure would have supported planning for advanced equipment, new production capacity and large-scale technical facilities. In a similar vein, a simplified EMI system would have boosted the ability of early-stage businesses to attract and retain essential technical talent. It’s important to clarify that the request isn’t for large structural reforms, but ones that carry meaningful influence over a company’s ability to scale.

Digitalisation represents another missed opportunity. While the forthcoming Advance Assurance pilot is encouraging, a fully modern, digital-first system would make a dramatic difference to the efficiency of relief administration. Innovators operate in environments that reward speed and clarity so a streamlined process would reduce friction and reflect the expectations of a modern technical economy.

What genuine support for those building in Britain looks like

Chancellor Rachel Reeves confidently delivered the line that if you build your business in Britain, the government would back you. Promises are of course easy to make and much harder to deliver against so the impact is yet to be seen. 

True support requires more than sector-specific funds and incremental adjustments to reliefs. Among other factors, it depends on sustained certainty surrounding investment incentives, internationally competitive credit rates, accessible thresholds for early-stage innovators and regulatory processes that operate with clarity and consistency. When these elements work together, the UK’s innovation ecosystem becomes a place where ambitious companies can plan with conviction.

The latest budget offered an encouraging step in the right direction through stability after a period of turbulence and signalling where the UK intends to compete on the global stage. The groundwork is in place for long-term, sustainable growth. The challenge now is to build on this foundation and create a landscape where innovation in Britain is not only supported but genuinely empowered.

Robert Whiteside is the CEO of EmpowerRD. 

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