The Chancellor has used the Spending Review to set out an ambitious vision for the UK economy, with science, technology and digital infrastructure at its heart. In her speech to the House of Commons, Rachel Reeves pledged to raise research and development funding to £22bn a year by 2029, describing innovation as central to ensuring Britain’s high-tech industries remain globally competitive. She also committed £2bn to support home-grown AI with the potential to address major economic and social challenges.
Alongside that, the government said it will increase the financial capacity of the British Business Bank to £25.6bn, enabling a roughly two-thirds rise in investment to around £2.5bn a year. The review, the first of its kind since the pandemic-era settlement and only the second since 2015, also included major commitments on the NHS, transport, housing and defence, as well as cuts to some departmental budgets.
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One of the clearest messages from the Spending Review was that science and technology will remain central to the government’s economic strategy. The pledge to increase annual R&D spending to £22bn by 2029 was welcomed by figures across the innovation economy.
James Clark, data protection, AI and digital regulation partner at Spencer West LLP, said the announcement adds real weight to the government’s January 2025 AI Action Plan, which set out its ambition for the UK to become a global leader in artificial intelligence. He said the funding reflects a more sovereign, UK-first approach and underlines the extent to which countries are competing to capture a greater share of the AI economy.
For health innovation businesses, the spending commitments were especially significant. David Harris, CEO and founder of Cambridge Healthcare Innovations, said the investment in research and innovation would strengthen the UK’s global standing in clinical trials and R&D, while creating an opportunity to drive more progress in treatment areas that have historically been underserved.
The expansion of the British Business Bank was one of the announcements most warmly received by investors and business support leaders. Its increased financial capacity to £25.6bn is intended to unlock a substantial increase in funding for growing businesses, especially those looking for the kind of scaleup capital that has often been in short supply in the UK.
Michael Moore, chief executive of the British Private Equity and Venture Capital Association, said the review delivered welcome support for the British Business Bank. He argued that if the UK wants to raise investment in fast-growing businesses, the bank needs both more scale and a broader remit to help build the country’s growth equity and venture capital ecosystem.
Alex Fenton, partner at FBX Capital, said the Spending Review was a sign that the government is beginning to take SME support more seriously. He pointed to the extension of the Growth Guarantee Scheme and the increase in its £2m cap as evidence that ministers are recognising that growing businesses need both sufficient funding and time to generate returns. At the same time, he stressed that the success of the policy would depend heavily on execution.
While the largest headline figure in the Spending Review was the additional £29bn a year for the NHS, technology was again positioned as a key enabler rather than a side issue. The NHS technology budget will rise by almost 50%, alongside a £10bn commitment to bring what Reeves described as the “analogue health system into the digital age”. The government is betting that digitisation will improve efficiency, modernise care pathways and help tackle longstanding pressure on services.
The Spending Review also tied future growth to workforce development. By the end of the spending period, £1.2bn a year will go towards supporting more than a million young people into training and apprenticeships, linking the government’s digital and industrial ambitions with a broader push to strengthen the national skills base.
Beyond technology and business support, the Spending Review set out a broader programme of public investment, alongside the fiscal trade-offs needed to fund it.
The government announced £15bn for new rail, tram and bus networks across the West Midlands and the North, including a new rail line between Liverpool and Manchester and further investment in buses, train stations and metro lines in areas such as Rochdale, Merseyside, Birmingham and West Yorkshire. The £3 bus fare cap in England will also be extended to 2027.
Other major commitments included £39bn for social and affordable housing, higher defence spending rising from 2.3% of GDP to 2.6% by 2027, and a pledge to end the use of asylum hotels.
Overall, the Spending Review signals a clear intention to use technology, innovation and targeted business support as drivers of long-term economic growth. The response from across the sector has been broadly positive, but the real test will be whether the government can turn these headline commitments into effective delivery and lasting impact.