A report published by Medicines Discovery Catapult (MDC) is urging the UK life sciences sector to boost investment following findings that the country’s economic turmoil is holding back drug discovery.

The MDC’s annual State of the Drug Discovery Nation Report, in partnership with the UK BioIndustry Association (BIA) and the Association of the British Pharmaceutical Industry (ABPI), estimates that the UK life sciences sector made an approximate £108.8bn in 2021 despite the Covid-19 pandemic. However, it warned that growth could be under threat from the UK’s increasing economic instability.

In its newest report, the MDC reports that UK healthcare small to medium enterprises (SMEs) made up approximately 35% of all life science start-ups created in Europe since 2012, with SMEs comprising approximately 70% of all the sector’s businesses.

It also found that between 2021 and 2022 funding for UK-based SMEs was £3.04bn to £1.7bn, with a reduction in public equity funding being the main factor identified by the report. Made worse by inflation affecting the cost of R&D in the UK.

At the same time, the report similarly identifies an overall shortage of skilled staff in the UK, with many of those working for the UK’s National Health Service (NHS) leaving for better-paying work elsewhere. It also calls out limited access to specific technologies and laboratory spaces, limiting an SMEs access to facilities that would allow it to produce the evidence needed to make its way to market. All these factors led to a bottleneck that the report argues makes life science investment in the UK needlessly risky for investors.

Chris Molloy, CEO of MDC, said: “If we want to keep the life sciences sector healthy and able to compete on a global stage, it is not enough to ask investors to simply become more comfortable with high-risk investments.

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“We need to de-risk the innovation as much as we can. For early-stage companies, we need to offer more coordinated access to the skills and technologies they need to generate ‘investment-ready’ data sets.

“For investors, we need to provide them with a holistic picture of the health landscape and the UK medicines discovery pipeline so they have more insights to make funding decisions. In short, our sector deserves a purposeful fit-to-fund programme that will ultimately serve our patients, our pensions and our national productivity.”

The report primarily calls on the UK government to increase its own investment in high-quality laboratory facilities nationwide, with the aim of providing the necessary infrastructure for UK SMEs at all levels to create a more level playing field.

The report follows after the UK’s Northern Health and Science Alliance (NHSA) wrote a letter to the Prime Minister calling on him to urgently address the north-south economic divide after it was found that two research centres in London and Cambridge received more government investment in one year than all life sciences companies in the north of England.

Steve Bates, CEO of the UK BioIndustry Association, added: “SMEs are at the forefront of innovation, with the majority of new medicines in the global pipeline originating from their labs. Their agility and cutting-edge research are propelling us forward in oncology, infectious diseases, and neurological disorders. Their success is not just a win for the sector but a beacon of hope for patients worldwide.”