The Chancellor Rachel Reeves’ spending review, the first multi-year review since 2021, was intended to be publish alongside the government’s industrial strategy and infrastructure strategy. However, the infrastructure strategy will now be published in the week following the Spending Review and the industrial strategy in the final week of June. Total departmental budgets grew by 2.3 per cent across the Spending Review period of 2026-27 to 2029-30.
Read the full Spending Review 2025 here
At-a-glance
- An £86 billion R&D funding package over the next four years will support key growth sectors outlined in the Industrial Strategy green paper (p34)
- The funding includes £500 million for the new R&D Missions Accelerator Programme, which will leverage a further £1.5 billion of private investment (p87)
- It also includes investment in “new opportunities” for talent, including fellowship schemes and a possible expansion of the High Potential Individual visa, by doubling the number of qualifying institutions, and improved access to the Global Talent visa (p87)
- At least £1 billion will be used to scale up the Advanced Research and Invention Agency (ARIA), the UK’s high-risk, high-reward research agency (p87)
- £410 million will be invested in a Local Innovation Partnership Fund (p87)
- Up to £750 million will pay for a new supercomputer at Edinburgh University, serving scientists across the country in a range of fields from vaccines to climate and weather prediction and fusion power research (p87)
- £2 billion will be allocated for artificial intelligence (AI) from 2026-27 to 2029-30. It will fund at least a 20-fold expansion of the UK’s AI Research Resource and back UK AI companies to grow and scale (p34)
- It will fund collaboration between business and universities to develop new AI courses, launch new AI fellowships and establish a new AI talent scholarship. AI diffusion will be supported through a new AI Adoption Fund (p88)
- Significant investment will be made in nuclear energy, with £14.2 billion for Sizewell C and more than £2.5 billion for Europe’s first Small Modular Reactor programmes. Rolls-Royce SMR is the preferred bidder to partner with Great British Energy (p83)
- £1.2 billion of additional investment per year by 2028-29 will be made in skills, including funding to support over 1.3 million 16-19 year olds to access high-quality training, and £625 million to train up to 60,000 skilled construction workers
- The government will set out further detail on its plans in a strategy for post-16 education and skills later in the year
- A Growth Mission Fund to support local economic growth will invest £240 million in projects for job creation and local economic regeneration. Further detail on this fund and the criteria for project selection will be set out later this summer
- The Spending Review reiterates the government’s intention to explore introducing a levy on higher education provider income from international students to upskill the domestic workforce and help reduce reliance on overseas labour (p62)
- The overall Department for Education (DfE) settlement provides total funding of £109.2 billion in 2028-29, equivalent to an annual average real terms increase of 1.5 per cent over the spending review period. This will pay for an expansion of free school meal eligibility, childcare entitlements for working parents and reform of the Special Educational Needs and Disabilities (SEND) system (p60)
- The devolved governments will receive, on average, an additional £4.8 billion per year between 2026-27 and 2028-29 and £930 million capital between 2026-27 and 2029-30 (p3)
Implications for governance
The key announcement in the 2025 spending review of increased investment in R&D will be welcomed by governing boards, although provides little in the way of relief to the financial pressures assailing the sector.
Through various funds, including a boosted ARIA, this investment “will flow to the world-leading scientists and innovators in UK businesses, universities, and R&D institutions across the UK”.
Vivienne Stern MBE, chief executive of Universities UK described the announcement as “a smart investment in one of the UK’s greatest strengths” and said universities will “put their shoulder to the wheel” to ensure research and innovation creates good jobs and attracts investment.
Governors will note that the spending review prioritises R&D funding in the UK’s “growth-driving sectors”, listed as advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services. For instance, over £3 billion of the R&D and capital funding will be go to advance manufacturing, and up to £600 million for life sciences.
Institution will want to ensure they are well placed to capitalise on R&D investment in these areas and take advantage of opportunities such as funding for new AI courses and various fellowship schemes.
Universities will also want to play a central role in the £410 million Local Innovation Partnerships Fund which will develop R&D programmes to support local economies. To ensure this happens, strong links and partnerships with employers and local businesses with be critical.
According to the National Centre for Universities and Business (NCUB), the spending review reveals important directions of travel. For instance, the substantial increase in defence-related R&D spending — rising from £1.7 billion in 2025/26 to £2.4 billion in 2028/29 — signals a shift in the research landscape that could have significant implications for the kinds of projects funded.
Dr Joe Marshall, NCUB chief executive, also points out that UK universities play an indispensable and multifaceted role in R&D but the severe funding pressures they continue to face could hamper efforts to drive innovation and progress.
Institutions outside the research golden triangle of London, Oxford, and Cambridge will welcome the government’s focus on spreading R&D growth throughout the UK. The push for local economic regeneration and skills development may also create opportunities for universities and colleges who are anchored in local and regional life. A new Growth Mission Fund, for instance, will fund local projects; selection criteria will be set out later in the summer.
While the spending review presents opportunities, it also contained potential risks, in the form of a levy on higher education income from international students, although the idea is to reinvest what is raised into the “higher education and skills system”. Some institutions may also be impacted by the shift away from Level 7 apprenticeships to lower-level ones, mentioned in the spending review.
Meanwhile, the Sutton Trust education charity accused the government of a “lack of consideration” for the plight of students in its lack of movement on student maintenance.
“If the government is serious about genuinely delivering greater opportunities for young people, it must urgently flesh out measures to deliver its mission to break down barriers to opportunities’,” said Nick Harrison, Sutton Trust CEO.
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