Will 2025 be the year the UK finally capitalises more on the commercial potential of its academic research in science and technology? Governments frequently talk it up – “Science and technology superpower by 2030” was the Conservative mantra – and there has been cross-party consensus that herein lies a glorious opportunity if the right environment is created to fully unlock the vast capability of the nation’s academic institutions.

As Peter Kyle, Minister for Science, Innovation and Technology, said to outline his department’s objectives: “Long-term, sustainable economic growth is impossible without innovation. You simply cannot make people better off without investment in R&D.” He has promised 10-year budgets that recognise the need for long-term, strategic thinking around the world’s biggest challenges and the funding to realise solutions that can be sold globally for the benefit of the UK economy.

It’s why in the Autumn Budget, the government pledged to invest £40 million in proof-of-concept funding over the next five years. Couple that with a £25 million allocation for the R&D Missions Programme, and it suggests a genuine step, or at least some cash, towards addressing the persistent funding gap that faces university spinouts. These commitments aim to accelerate the commercialisation of academic research, particularly in high-impact (and high revenue) sectors such as health and life sciences. However, for such commitments to yield tangible results for spinouts, universities, and the wider economy, the government focus must not just be on more money but how that money is used. It must be used in a way that also overcomes historical challenges.

One of the key barriers for spinouts has been the persistent ‘proof-of-concept gap’. While software-based spinouts benefit from relatively lower input costs – computing facilities are generally less resource-intensive than laboratory setups – hardware and life sciences spinouts face significant financial and technical hurdles. Universities' demands, often shaped by their investment in wet-lab facilities, technical expertise, and collaboration networks, can further complicate the path to market. The Autumn Budget’s focus on funding mechanisms is therefore a welcome move, but it also raises questions about how equitably this funding will be distributed across disciplines and the role universities will play in determining equity stakes in spinouts. Recent news that 49 universities adopted new guidelines that will mean academics and students who commercialise software-related ventures will be able to keep a larger proportion of the equity provides further context for this debate. Whilst this proposal on equity is consistent with the USIT Software guide, question marks still remain over how other spinouts will be treated.

From a patent attorney’s perspective, this funding creates new opportunities for spinouts to strengthen their IP portfolios early. A robust IP strategy is essential to attracting investment and securing a competitive edge in the market, particularly where IP is likely to be the sole “asset” held by a spinout which likely leases its premises and equipment. However, as noted in the UKRI’s 2023 spinout report, many spinouts struggle to balance the costs of protecting their innovations against the need to allocate resources towards research and development. The new funding streams should allow for more structured support in this area, enabling spinouts to secure the patents, designs and trademarks that are critical to their long-term success. Patent, design and trade mark attorneys will play a key role in guiding these spinouts, ensuring their IP strategies align with both their commercial objectives and the expectations of potential investors.

For solicitors, the focus shifts to navigating the broader legal and commercial challenges spinouts face. The retention of Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is an important incentive, but there is still a need for greater clarity on how the government intends to stimulate further investment. Rachel Reeves’ Mansion House speech hinted at reforms to unlock the opportunity for patient capital to invest in “higher risk” options such as spinouts and start-ups, particularly through pension funds. If implemented effectively, these reforms could help to provide the much-needed funding for proof of concept and obtaining regulatory approvals that often eludes spinouts due to venture capital and private equity generally seeking shorter term returns. Consolidating local government pension funds into larger managed pots which then invest in UK businesses, for example, could set a precedent for other investors, driving competition and capital inflow into the UK innovation ecosystem.

The Autumn Budget’s emphasis on specialist economies around universities also highlights the importance of innovation clusters. Regions like Manchester and Glasgow, already benefiting from the Innovation Accelerators programme, are well-positioned to leverage these investments. However, ensuring these clusters deliver on their potential will require close collaboration between industry and academia. For spinouts, this means not only accessing funding but also building partnerships that bridge the gap between research and commercialisation. Solicitors can help spinouts navigate the complexities of these partnerships, from structuring agreements to ensuring compliance with regulatory frameworks.

One area that remains underexplored is how this funding will specifically address the needs of hardware, medical devices and life sciences spinouts. These sectors often require significant upfront investment and face longer timelines to market. The government’s current focus on software (and AI) spinouts, while understandable, risks overlooking these high-value sectors. To truly unlock the potential of UK innovation, additional measures may be needed to support these more capital-intensive spinouts. For instance, targeted funding for wet-lab infrastructure, specialist manufacturing or incentives for industry collaborations could make a significant difference.

Looking ahead, spinouts must be proactive in aligning with these new funding streams. From an IP standpoint, this means conducting thorough audits to ensure their portfolios and IP strategies are investment-ready and aligned with their business plans, prioritising filings in jurisdictions that align with their commercial ambitions. On the legal side, spinouts must ensure their corporate structures, equity arrangements, and governance practices are robust and attractive to investors just as much as their IP strategy is. Solicitors and patent, design and trade mark attorneys, working in tandem, can provide the comprehensive support spinouts needed to navigate these challenges effectively.

The Government’s commitments represent a significant opportunity for the UK’s innovation landscape. However, to fully realise this potential, all stakeholders must address the systemic issues that have historically hindered spinout growth. With careful planning and strategic use of these funding streams, the goal should be spinouts moving successfully through the proof-of-concept stage to market success, driving economic growth and cementing the UK’s position as a global leader in innovation.

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