{"id":14987,"date":"2026-10-27T14:56:15","date_gmt":"2026-10-27T13:56:15","guid":{"rendered":"https:\/\/leyton.com\/uk\/?post_type=article&p=14987"},"modified":"2026-10-27T14:56:17","modified_gmt":"2026-10-27T13:56:17","slug":"pharmaceutical-rd-tax-credits","status":"publish","type":"article","link":"https:\/\/leyton.com\/uk\/insights\/articles\/pharmaceutical-rd-tax-credits\/","title":{"rendered":"How R&D Tax Credits can boost drug R&D in the UK"},"content":{"rendered":"\n

Spending on drug development in the UK has never been higher. According to Statista<\/a>, UK pharmaceutical businesses spent over nine billion pounds on R&D in 2024 alone, as part of a spending boom post-Covid.<\/p>\n\n\n\n

Drug R&D is a huge driver of our economy, with the government\u2019s Life Sciences Sector Plan<\/a> noting that pharmaceutical research and development accounted for 17% of all UK business R&D in 2023.<\/p>\n\n\n\n

But the pharmaceuticals sector still has some fairly large obstacles to overcome, particularly when it comes to bringing new drugs to market. With AI creating the potential to rapidly accelerate drug development, the UK is very keen not to fall behind, with the government setting some ambitious targets for the sector\u2019s future.<\/p>\n\n\n\n

In this article, we look at what\u2019s driving the drug R&D market, the challenges the sector needs to overcome, where the current opportunities lie, and how R&D Tax Credits<\/a> can boost pharmaceutical innovation.<\/p>\n\n\n\n

What is driving drug R&D in the UK?<\/h2>\n\n\n\n

Government targets for life sciences<\/h3>\n\n\n\n

Drug R&D is benefiting massively from government backing, with the Industrial Strategy<\/a> naming life sciences as one of the eight sectors with the highest growth potential.<\/p>\n\n\n\n

Within this strategy, the government has set the target for the UK to become Europe’s leading life sciences economy by 2030 and the third-largest life sciences economy globally, behind the US and China, by 2035.<\/p>\n\n\n\n

Faster regulation through the MHRA<\/h3>\n\n\n\n

The government wants to shorten the time it takes for new drug treatments to go from discovery through to clinical trials and into use. One key way of making this happen is making the Medicines and Healthcare products Regulatory Agency (MHRA) a faster, more agile regulator. They have recently published their MHRA Strategy 2030<\/a>, which sets out their plans for making regulation faster to keep up with innovation while using AI and data to improve safety monitoring.<\/p>\n\n\n\n

AI for Science and new research funding<\/h3>\n\n\n\n

As well as the Life Sciences plan, the government has also published an AI for Science Strategy<\/a>, which says that the \u201cfirst mission\u201d is to use the technology to \u201cspeed up the research of new drugs and treatments\u201d, with an ambition to develop trial-ready drugs within 100 days by 2030 and to deploy new treatments faster.<\/p>\n\n\n\n

The Department for Science, Innovation and Technology (DSIT) has backed this ambition with an \u00a38 million grant for the OpenBind<\/a> consortium, which is building a large, industrial-scale dataset on how drugs interact with proteins to help train AI models for drug discovery.<\/p>\n\n\n\n

The government is also investing \u00a330 million in a new preclinical translational models hub<\/a> to create a pipeline of novel translational medicine models.<\/p>\n\n\n\n

Better access to UK health data<\/h3>\n\n\n\n

The government wants to give innovative companies better access to UK health data. To deliver this, it\u2019s working with Wellcome<\/a>, an independent charitable foundation that funds health research, to establish the Health Data Research Service<\/a> (HDRS) to make it easier to access UK health data for research (including NHS data), backed by up to \u00a3600 million of investment.<\/p>\n\n\n\n

Better access to health data could help as potential drugs move closer to human trials, especially with the UK\u2019s homegrown advantage of having the NHS. The AI for Science Strategy<\/a> says the HDRS will support the development of models that \u201cimprove prediction of human responses to interventions\u201d.<\/p>\n\n\n\n

What is holding back drug R&D in the UK?<\/h2>\n\n\n\n

Struggles with finding investment and regulatory challenges<\/h3>\n\n\n\n

R&D into creating new drugs is often cited as one of the UK\u2019s real strengths (as mentioned in our introduction, pharma accounted for 17% of UK business R&D in 2023). However, the government\u2019s Life Sciences Sector Plan<\/a> acknowledges that the UK struggles with commercialisation and adoption, with businesses often finding it hard to find the necessary investment needed for growth.<\/p>\n\n\n\n

However, a recent Parliamentary report on Medicines Security<\/a> flagged several other serious barriers holding back drug R&D in the UK. It discusses some high-profile cases where investment in UK-based medicines R&D was withdrawn or paused. For example, Eli Lilly paused investment in UK R&D amid concerns about financial viability, and AstraZeneca paused plans to invest \u00a3200 million at a Cambridge research site.<\/p>\n\n\n\n

Explaining what caused these companies to pivot away from their R&D and manufacturing operations in the UK, the BioIndustry Association pointed to \u201chigher operating costs, limited tax and investment incentives and regulatory challenges.\u201d<\/p>\n\n\n\n

Clinical trial delays<\/h3>\n\n\n\n

Both the Life Sciences Sector Plan<\/a> and Medicines Security<\/a> reports found that clinical trials were underperforming, with it taking the UK longer to set up and approve trials compared to competing countries. In a startling example, the Parliamentary report said that getting approval for a clinical trial in the UK takes 60 to 90 days, compared to the US, which takes just 30 days.<\/p>\n\n\n\n

Where are the biggest opportunities for drug R&D?<\/h2>\n\n\n\n

AI in drug discovery<\/h3>\n\n\n\n

Perhaps the biggest and most exciting opportunity is the use of AI in drug discovery. The government\u2019s AI for Science Strategy<\/a> says that the \u201crichest AI opportunities\u201d are concentrated in the preclinical phase of the drug discovery pipeline.<\/p>\n\n\n\n

For example, in the discovery stage AI tools can find signals \u201cscattered across vast scientific literatures\u201d and buried in genetics and health datasets that no single researcher could ever hope to survey on their own.<\/p>\n\n\n\n

The government also wants to make binding affinity, which is how strongly a drug molecule binds to its target, \u201cfar more predictable\u201d, helping scientists choose and design drugs that work better with fewer \u201coff-target\u201d effects. It is also exploring how better developability models could \u201caccelerate lead optimisation and preclinical testing\u201d.<\/p>\n\n\n\n

Human-relevant models and organoids<\/h3>\n\n\n\n

Another opportunity for R&D is developing more human-relevant models. The Replacing Animals in Science Strategy<\/a> highlights 3D cell systems and organoids, which can recreate an environment \u201cmore representative of human tissue\u201d. Not only is this more humane, but it could also create \u201cphysiologically relevant human disease models\u201d with likely much better R&D outcomes.<\/p>\n\n\n\n

It also points to developing new organ-on-a-chip technologies, which can simulate the functions and environment of human tissues and organs, with the potential to improve how researchers study drug and chemical behaviour in humans.<\/p>\n\n\n\n

How can R&D Tax Credits support pharmaceutical drug innovation?<\/h2>\n\n\n\n

With the government currently prioritising and investing in technologies that can help to drive drug R&D, there is a huge opportunity for exciting new breakthroughs in the sector.<\/p>\n\n\n\n

But despite access to funding holding UK drug development back, many businesses in the pharmaceutical industry are not taking full advantage of the tax relief the government has made available to them in the form of R&D Tax Credits<\/a>, which offer generous financial incentives to encourage investment in science and technology (including drug development).<\/p>\n\n\n\n

What counts as R&D in drug development?<\/h3>\n\n\n\n

R&D in drug innovation can be broadly defined as solutions or supporting activities that resolve a pharmaceutical unknown or uncertainty. It can be virtually limitless; however, some of the key areas we have identified as prime for R&D Tax Credits<\/a> are:<\/p>\n\n\n\n