Experts Share: How Can The Autumn Budget Support UK Innovation?

The Autumn Budget on the 26th could bring some of the most talked-about reforms to pensions in years. Penfold, a digital pension provider, says speculation is growing that Chancellor Rachel Reeves may look to pension tax relief, salary sacrifice schemes and the 25% tax-free lump sum as possible ways to raise funds.

The Institute for Fiscal Studies has reported that the government faces a £22 billion shortfall. Since Reeves has ruled out increasing income tax, VAT or National Insurance, experts say pensions could be next in line for review. Penfold advised that quick fixes could damage long-term retirement security. Chris Eastwood, the company’s co-founder, said: “Tinkering with pension benefits might offer a short-term fix for the Treasury, but it risks long-term harm to people’s financial futures. Pension tax relief and incentives are essential to help people across the UK retire with confidence and security.”

Salary sacrifice schemes could be a target, as removing employer National Insurance exemptions might raise as much as £17 billion. Pension tax relief could also change from the current system, which reflects a person’s income bracket, to a flat rate of about 30%. That would help basic-rate taxpayers but limit the benefit for higher earners. The 25% tax-free lump sum, capped at £268,275, is also under review. Reports from the BBC say the government might lower the allowance to raise money without breaking its pledge not to increase main taxes.

A possible return of the lifetime allowance, scrapped in 2023, is also being discussed. Reintroducing it would mainly affect high-income earners and long-term savers. Eastwood called for calm and said Penfold would guide its customers through any changes.

 

Is Venture Capital Making A Comeback?

 

New figures from the Dealroom-HSBC Innovation Banking UK Q3 2025 report show venture capital investment into British startups has surged to its highest level since 2022. UK innovation companies raised $9 billion in the third quarter of this year, marking the second-strongest Q3 on record.

Investment rose 2.4 times from the previous quarter and 2.6 times compared with last year. In total, startups have raised $17.3 billion so far in 2025, already matching all of 2024, and are on track to reach $23.1 billion by December. The report said funding grew across all stages of investment, from early to late rounds, showing renewed confidence among investors.

The UK continues to lead Europe, raising more than France, Germany and Switzerland combined. 45% of this year’s funding rounds have taken place outside London, with Cambridge, Manchester and Glasgow among the top regional centres. HSBC Innovation Banking’s Head of Banking, Simon Bumfrey, said the return of large-scale $100 million-plus rounds showed international investors still view the UK as a place where world-class ideas can thrive.

There were 12 megarounds worth over $100 million in Q3 alone, accounting for 61% of all capital raised. The biggest included Revolut’s $2 billion round, Nscale’s $1.1 billion raise for AI infrastructure, and a $600 million investment in a Cambridge-based quantum company.

 

Which Sectors Are Leading The Surge?

 

Fintech continues to dominate UK venture investment, attracting $5.3 billion this year. The sector was boosted by Revolut’s multi-billion-dollar round, but health tech, AI and clean energy have also been strong performers. Health startups attracted $3.2 billion through companies such as Isomorphic Labs, Charm Therapeutics and CRM Surgical, which develop drug discovery tools, gene therapies and robotic surgery systems.

AI now accounts for almost half of all SaaS investment in the UK. Cambridge-based CuspAI raised $100 million in September to develop AI-designed materials for sustainable energy. Quantum computing has also seen record funding, with $688 million raised this year across more than 50 companies. Ashley Montanaro, CEO of ORCA Computing, said global confidence in quantum technology had never been stronger, with both the UK and US making it a central part of their tech collaboration.

HSBC Innovation Banking, the UK now has 198 unicorns, startups valued at $1 billion or more and 241 “thoroughbreds,” meaning companies generating at least $100 million in annual revenue. Of these, 120 are both unicorns and thoroughbreds. The report said this shows the maturity and global credibility of the UK’s innovation economy.

 

Are Regional Cities Driving Innovation?

 

Innovation is no longer limited to the capital. Mercia Ventures Managing Director Will Clark said 45% of this year’s funding rounds were outside London, showing the growing strength of regional ecosystems. Cambridge, Oxford, Glasgow, Manchester and Edinburgh are among the most active hubs.

Investors said the expansion of the tech scene beyond London is creating new jobs and attracting global capital. Clark added that founder interest in venture debt has grown as entrepreneurs look for flexible funding options. He said the UK’s strength lies in its diversity and the ambition of founders building successful companies in their local areas.

 

How Can The Autumn Budget Support UK Innovation?

 

Experts share how they think the upcoming budget should support the growing innovation…

 

Our Experts:

 

• Ben Peters, CEO and Founder, Cogna
• Ross McNairn, CEO, Wordsmith AI
• Robert Whiteside, CEO, EmpowerRD
• Jane Smith, Chief Data & AI Officer, ThoughtSpot
• Ollie Whiting, CEO, La Fosse Associates
• Simon Nobel, CEO, Cezanne HR
• Gareth Scargill, Director at Nexus, University of Leeds
• Jenny Burns, CEO, Magnetic
• Mark Skelton, Chief Technology Officer, Node4

 

Ben Peters, CEO and Founder, Cogna

 

 

“The UK can’t power an industrial renewal on electricity that costs 30% more than France. If the Budget wants to support innovation, it needs to fix the foundations first: expedited investment in nuclear and renewables, fast-tracked grid upgrades, and planning reform for data centres.

“The Industrial Strategy has set a useful direction. Now we need delivery that matches the ambition. Lower energy costs are the basic prerequisite for automation and productivity growth in the industries that keep the country running.

“AI adoption will struggle to reach manufacturing, utilities and construction if these sectors can’t afford to automate. Innovation funds and sandboxes are helpful, but they can’t compensate for high base costs.
Get energy infrastructure right, and the conditions exist for real productivity gains. Britain has the technical capacity and the industrial base. What’s needed now is policy that moves at the pace required to make those assets competitive. The Budget is an opportunity to show that infrastructure investment comes first, not as an afterthought.”

 

Ross McNairn, CEO, Wordsmith AI

 

 

“The Government’s move to explore an AI Growth Lab is a welcome step toward tackling some of the poorly enabled bureaucracy that continues to hold back UK innovation. We’ve seen how effective this approach can be: the FCA’s fintech sandbox was instrumental in turning the UK into a world-leading financial technology centre. It provided early-stage companies like Zilch and Yoti with the regulatory clarity and flexibility they needed to test ideas safely, attract investment, and scale. The same principle could now help legal tech and other AI-driven sectors grow responsibly.

“In legal services, the opportunity is huge. A dedicated AI sandbox could give more legal-tech firms the freedom to experiment with technology and develop much-needed tools for the sector in live environments, while reducing the cost and risk of innovation.

“The benefits of this approach could be transformative in terms of enabling faster product development, lower barriers to entry, and greater confidence for both investors and end users. However, dangers will remain around data use, accountability, and consumer protection in regulated areas such as employment, housing, and financial law. The challenge for regulators will be to enable progress without compromising trust. If the Government can strike that balance, the AI Growth Lab could spur real momentum and make the UK a leader in responsible AI innovation.”

 

Robert Whiteside, CEO, EmpowerRD

 

 

“The Autumn Budget is a pivotal moment for government to show its commitment to innovation-led growth. Startups and scaleups are the engine of the UK’s R&D ecosystem, but they continue to face mounting pressure from complex and evolving regulation around HMRC’s R&D tax relief scheme. The impact of previous reforms such as the consolidation of the SME and RDEC schemes, reduced relief rates for some, and tighter rules on overseas activity, has resulted in reduction in R&D claim volume as evidenced by the latest HMRC figures.

“Our UK Innovation Report 2025 found that over half of startups and scaleups (52%) cite regulation as their biggest barrier to accelerating R&D, and one in four have already faced an HMRC enquiry in the past year. At a time when the UK needs to strengthen its position as a global innovation hub, policy should aim to reward ambition, not penalise it with added complexity.

“Following the announcement of a £55 billion R&D funding boost to help unlock innovation, this Budget presents a chance to simplify compliance and expand incentives for genuine R&D activity, especially for early-stage and loss-making businesses that depend on relief to reinvest in innovation. With the right balance between governance and encouragement, the government can help ensure startups are spending more time innovating and less time navigating red tape.”

 

 

Jane Smith, Chief Data & AI Officer, ThoughtSpot

 

 

“The autumn budget will be a critical indicator for the future of the UK and its technology sector.

“While data centres and GPU farms are top of mind for their job creation and supply chain spend, what will be even more impactful would be to see investment into local R&D, IP rights, and commercialisation pathways. By investing in core model R&D, IP ownership and strategic product decisions – the UK tech industry will be better suited to adapt and grow.

“If we look at the Middle East – the ‘Digital Dubai’ initiative is focused on embedding AI into everything from traffic management to healthcare. Having a budget ring fenced for AI in the public sector included in this year’s autumn budget would indicate a similar, and innovative, path for the UK.

“Another way to support innovation is through tax reliefs and grants for companies that hire or train AI roles (e.g. AI product managers, agent orchestration product managers, data scientists etc.), and funding for AI upskilling and reskilling.

“Incremental initiatives can have an impact and are pioneered in other countries and we can take inspiration from them. Just look at Ireland and where they’ve integrated the research-to-industry pipeline with programmes like CeADAR and ADAPT as an example, but they would set the UK up for success.

“Today, AI represents the biggest catalyst for growth that could propel UK companies into valuations we have not yet seen. The budget should help create jobs for the future as well as provide revenue. By combining the right investment and regulations, like the EU Data Act, in place the UK will be in a much better position to innovate with confidence.”

 

Ollie Whiting, CEO, La Fosse Associates

 

 

“The Autumn Budget has a real opportunity to unlock growth through innovation and investment in skills. Britain’s economic future won’t be secured through short-term tax fixes, but by back the ideas, technologies, and people that drive long-term productivity.

“A report from earlier this year revealed that nearly 60% of the global workforce will need upskilling or reskilling by 20301 – so the Budget is the perfect opportunity to support the service sectors that are retraining and redeploying talent at scale, from staffing and consulting to digital learning and technology services.

“For a stronger future in tech, I think that the government should expand research and development incentives beyond traditional manufacturing to include digital and service-led innovation, introduce targeted reliefs for productivity technology and workforce upskilling, and extend full expensive to cover software, automation, and data infrastructure.

“If the Chancellor is serious about building a higher-productivity economy, the Budget must reward businesses that invest in innovation. We don’t need another round of austerity, we need ambition, and the confidence to invest in our own potential.”

 

Simon Nobel, CEO, Cezanne HR

 

 

“The UK tech and business community is full of ambition, skill and execution, but it operates in an environment that still feels designed for a different decade. Tax credits, grants and growth incentives are meant to encourage innovation, yet too often they come wrapped in complexity that drains time and resources. You shouldn’t need a full-time specialist to navigate the very support that’s supposed to help you grow.

“If the government genuinely wants to unlock innovation, it must also look hard at the tax burden. Over-taxing the very firms that create jobs, export revenue and drive productivity risks killing innovation before it starts. Rising payroll costs, unpredictable fiscal changes and shrinking reliefs make it harder for leaders to plan and invest in the long term. Businesses can’t take creative risks when they’re fighting to cover tax bills instead of funding growth.

“The answer is simple. Stability and simplicity will drive more innovation than any new initiative ever could. The Budget should back the companies already building and hiring, not add more bureaucracy and cost, this will give them the breathing space to innovate, compete and thrive.”

 

Gareth Scargill, Director at Nexus, University of Leeds

 

 

“If the Government is serious about driving innovation, the Autumn Budget must prioritise long-term investment and policy stability over short-term fixes. Start-ups and scale-ups can only innovate with confidence when there’s consistency in funding and support.

“Innovation doesn’t happen in isolation; it depends on strong regional ecosystems. Continued investment in digital infrastructure and transport connectivity will allow regional innovation clusters to thrive and attract new talent. Keeping momentum behind regional investment zones and innovation partnership funding is vital; pulling support from these programmes would weaken collaboration and blunt regional and national growth.

“Skills sit at the heart of innovation. Sustained funding for apprenticeships, technical training, and digital capability will ensure the UK has the workforce to deliver on ambitious innovation strategies.

“Continued investment in R&D and green innovation will secure the UK’s long-term position as a global leader in emerging sectors such as healthtech and smart cities. Cutting back now would create short-term savings but risk long-term decline.

“Innovation also depends on a supportive fiscal environment. Any changes to taxation or funding mechanisms should be carefully considered to avoid stifling SME growth and recruitment. The Government must balance fairness with supporting innovation.

“Ultimately, the Budget should send one clear message – that the UK is committed to being an innovation nation, backing the ideas, infrastructure and talent that will drive long-term economic growth.”

 

Jenny Burns, CEO, Magnetic

 

 

“The Autumn Budget is a chance to show real commitment to innovation not just through tax incentives, but by backing the conditions that make it thrive: confidence, collaboration and capability. Businesses need clarity and stability to invest in new ideas, something not supported by short-term schemes that shift with every fiscal cycle.

“The government should focus on unlocking growth through people such as investing in skills, apprenticeships and leadership in emerging sectors and by supporting smaller, high-growth firms that often struggle to access funding or navigate bureaucracy.

“Innovation means more than just investing in technology; it’s about mindset. With AI and other emerging technologies transforming industries, policies that encourage experimentation, reduce risk for innovators and reward long-term thinking will do more to boost productivity and competitiveness than headline-grabbing cost cuts.

“If the UK wants to lead in innovation, it must build an ecosystem that nurtures creativity, resilience, and the courage to try, fail, and try again.”

 

Mark Skelton, Chief Technology Officer, Node4

 

 

“UK businesses need predictability and stability. Steady policy and a clear long-term direction will allow businesses to plan, invest, and focus on growth and innovation.

“For the technology sector, any rise in capital gains tax will have a huge impact, as mergers and acquisitions (M&A) activity will continue to flatline. Since capital gains tax was slashed in the last budget, we have seen a huge slowdown in M&A activity. M&As are a key driver for innovation and growth in the tech sector, so until the incentives to accelerate that activity are restored, the UK will only make slow progress with innovation.

“The continued investment in AI and R&D from the government so far is positive, but to maintain momentum the technology sector must stay protected from additional tax burdens. It is essential that the government continues to support – not stifle – innovation and growth if the UK is to meet its broader goal of being an AI superpower and global leader in innovation.”