Labour Victory: The Implications and Opportunities for Venture Capital and Life Sciences Investments

So, the results are in but what lies ahead for venture capital and life sciences investors following Labour’s victory? Here we share our initial thoughts on how the change in government might impact the UK venture capital and life sciences market. 

“Growth” was a consistent refrain of the Labour Party during the UK 2024 General Election. They placed at the centre of their campaign a desire to promote wealth creation, provide a stable policy environment to support business and encourage investment. We analyse some of the key policies in their manifesto, which focus on a combination of trying to leverage private investment and some regulatory reforms. 

National Wealth Fund

Labour will establish a National Wealth Fund. The aspiration is for this to be capitalised with £7.3 billion over the course of the next Parliament. The purpose of the fund is to drive growth and the clean energy missions, as with GB Energy.

The National Wealth Fund will make investments to upgrade ports and build supply chains, build new gigafactories, rebuild the steel industry, accelerate the deployment of carbon capture and support the manufacturing of green hydrogen. 

The new Chancellor Rachel Reeves has promised to work with the private sector to drive growth. The fund aims to attract three pounds of private investment for every one pound of public investment. 

Reforms to pension funds to drive venture capital investment

Labour is also promising to bring in reforms to increase investment into the UK by British pension funds. There has been a concern that the UK has not realised the full benefits of its domestic pension funds as investors in venture capital. The outgoing Conservative government had also identified this as a key area of reform – supporting a “Venture Capital Investment Compact” in partnership with the sector.

This is an area where Labour will likely be confident of seeing changes during the course of the next Parliament, whether due to their reforms or market trends. We have previously highlighted this, noting that investment levels were suppressed in 2023 with VC funds now looking likely to deploy record levels of dry powder in 2024. The UK remains the largest destination of VC investment in Europe, and so reforms to boost this will likely be welcomed by the sector. 

Consistency of R&D funding

The Labour Party has identified funding cycles for key R&D institutions as a block on innovation. Instead, as part of Labour’s promised “decade of national renewal”, it intends to move towards ten-year budgets. The purpose is to create partnerships with industry. As a consequence of Brexit the UK had lost access (since regained) to the EU Horizon program, which had caused concern for science-heavy start-ups, such as biotechs. A more consistent approach to funding is likely to be welcomed. 

Encouraging innovation

Labour plans to work with universities to support spinouts. The UK is seen as having the highest quality spinouts, particularly in the life sciences context. We will continue to assess what reforms are actually proposed. However, as with the other proposals, it appears that the primary focus will be on increasing the amount of financing provided by industry. As noted above, the Labour Party may be confident that existing investor demand will help achieve this. 

In addition, the Labour Party has promised to create a new Regulatory Innovation Office to facilitate innovation to reduce barriers from the government side. The new office promises to speed up approval timelines, as well as help regulators to improve existing regulations. For life sciences, this may mean identifying areas in which MHRA can continue to encourage innovation. 

Maximising clinical trials

We have previously noted that new Health Secretary Wes Streeting has promised to boost the number of clinical trials undertaken in the UK. This was a manifesto promise by the Labour Party, including to make the process “more efficient and accessible”. 

We still need to see the details of what Labour is proposing. However, reform will be welcomed by British biotechs, particularly as they navigate the expense and complexity of clinical trials. 

Conclusion

The Labour Party’s reforms do not always promise new government funding, but attempt to encourage private investment. However, they do resonate with calls by start-ups and biotechs that they need to access more financing. Incremental regulatory reforms from a pro-innovation perspective will also be welcomed. Taken together, these are a promising set of proposals, but will require investor support. 

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