The Chancellor of the Exchequer Rachel Reeves presented her Spending Review (SR) to Parliament on Wednesday 11 June. The following direct extracts are of particular note to the materials, science and innovation community.
Innovation
Research and Development
The government is increasing R&D funding to £22.6 billion per year by 2029‑30, an above-inflation increase. This increase will deliver:
- £500 million for the new R&D Missions Accelerator Programme, which will leverage a further £1.5 billion of private investment into innovation challenges that support the government’s missions;
- New opportunities for top talent, including fellowship schemes which will attract the brightest scientists to the UK.
- At least £1 billion over the SR to scale up the Advanced Research and Invention Agency (ARIA), the UK’s high-risk, high-reward research agency; and
- Up to £750 million for a new supercomputer at Edinburgh University.
- The government will take further steps to ensure the benefits of innovation are felt across the UK. As part of this it is launching a new £410 million Local Innovation Partnerships Fund, giving local leaders a central role in co-creating R&D programmes.
This £86 funding package was announced on 8th June ahead of the Spending Review.
Artificial Intelligence
At this SR, the government is allocating £2 billion for artificial intelligence (AI) from 2026-27 to 2029-30.This investment will build the UK’s sovereign AI capabilities, funding at least a 20-fold expansion of the UK’s AI Research Resource and backing UK AI companies to grow and scale through the new UK Sovereign AI Unit.
The government is funding collaboration between business and the UK’s world-class universities to develop new AI courses, launch new AI fellowships and establish a prestigious new AI talent scholarship to develop the AI skills of the future. The government will also support AI diffusion through a new AI Adoption Fund.
Clean Energy and Climate Security
The government outlined its plans for investment in clean energy industries throughout the Spending Review, including £14.2 billion for the development of the Sizewell C nuclear power plant in Suffolk, £2.5 billion to enable a Small Modular Reactor programme, £9.4 billion on Carbon Capture, Utilisation and Storage (CCUS) and £300 million for offshore wind supply chains. The government also committed £4.2 billion over three years to build and maintain flood defences.
In its earlier statement on 10 June government stated that Sizewell C will provide 10,000 people with employment at peak construction and support thousands more jobs across the UK, including 1,500 apprenticeships. The company has already signed £330 million in contracts with local companies and will boost supply chains across the UK with 70% of contracts predicted to go to 3,500 British suppliers – supporting new jobs in construction, welding, and hospitality.
Chancellor of the Exchequer, Rachel Reeves, said: “Today we are once again investing in Britian’s renewal, with the biggest nuclear building programme in a generation.”
Security and Defence
In February, the government announced that defence spending will rise to 2.6% of GDP from 2027, with an ambition to reach 3% in the next Parliament. This SR confirms the government’s plans for defence spending, consistent with the announcement in February. It also supports the ambition set out in the recently published Strategic Defence Review.
The Strategic Defence Review (SDR), published on 2 June 2025, sets out a shift in the UK’s approach to deterrence and defence: moving to warfighting readiness, adopting a ‘NATO First’ approach, using defence as an engine for growth. Further detail on how the government will deliver its ambition will be published in the Defence Investment Plan later in the year. It will include:
- Nuclear: £15 billion over this Parliament for a sovereign warhead programme, supporting over 9,000 jobs in the UK;
- Directed energy weapons: nearly £1 billion of new funding this Parliament to deliver the first European laser-directed energy weapon in service;
- Autonomous systems: over £4 billion in autonomous systems. This will include £2 billion of new investment this Parliament, including for land drone swarms;
- Munitions: £6 billion for munitions this Parliament, including £1.5 billion for an ‘always on’ pipeline and at least six new energetics and munitions factories in the UK, generating over 1,000 jobs
Transport
Over Phase 2 of the SR, the government will increase transport capital investment to give people across the country greater access to jobs, education, training and public services. The government is investing in transport in city regions across England, this includes:
Providing £15.6 billion in total by 2031-32 for the elected mayors of some of England’s largest city regions via the Transport for City Regions (TCR) settlements, supporting them to invest in their local transport priorities, including zero emission buses, trams and local rail. This will more than double real terms city region transport spending per year by 2029-30, compared to 2024-25;
- Investing £2.3 billion in the Local Transport Grant over Phase 2 for local transport improvements.
- Providing the largest multi-year settlement for London in over a decade, with £2.2 billion of funding between 2026-27 and 2029-30 for Transport for London’s capital renewals programme.
- The Transpennine Route Upgrade, for which the government will provide £3.5 billion. This will reduce the journey time for commuters travelling between Manchester and Leeds by a quarter
- Allocating £2.5 billion to progress the delivery of East West Rail, supporting housing developments and unlocking the potential of the Oxford to Cambridge Growth Corridor.
Housing / Construction
The government’s commitment to build 1.5 million homes seeks is aimed at driving a radical increase in house building to provide secure, affordable and quality homes for all.
The government confirmed £3.9 billion for a new 10-year Affordable Homes Programme. Through Phase 2 of the SR, the government is going further to deliver on its housebuilding ambition. This includes:
- Delivering the biggest boost to investment in social and affordable housing in a generation, confirming £39 billion for a new 10-year Affordable Homes Programme;
- Catalysing additional private investment to further boost house building by confirming £4.8 billion in financial transactions (FTs) from 2026-27 to 2029-30; and,
- Investing in infrastructure and land remediation to deliver new housing schemes in partnership with the private sector.
Industrial Strategy
The government will publish its modern Industrial Strategy later in June. It will set out how the government will accelerate growth in eight growth-driving sectors and strengthen economic resilience. These sectors – advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services – are active across the regions and nations, each with their own specialisms. Ahead of the Industrial Strategy’s publication, the SR sets out the government’s latest steps to support the growth-driving sectors, key extracts include:
- Advanced manufacturing – over £3 billion R&D and capital funding over the next four years to unlock investment across the UK;
- Clean energy industries – significant additional funding to ensure the clean energy mission delivers growth across the UK;
- Digital and technologies – over £2 billion to drive the AI Action Plan including a 20-fold increase in support for compute capacity
- Life sciences – up to £600 million from 2026‑27 to 2029‑30 in collaboration with the Department for Science, Innovation and Technology (DSIT) and the Wellcome Trust to launch the world’s first Health Data Research Service and up to £520 million life sciences manufacturing funding from 2025-26 to 2029-30
Ahead of the publication of the Defence Industrial Strategy sector plan, the government has noted that spending will be weighted towards capital and will prioritise R&D and innovation. The defence R&D budget will be over £2 billion in 2026-27 and will rise each year.
Steel
Also of particular note to the materials community, the Department for Business and Trade’s (DBT) settlement included the following:
- Funding for a £500 million grant to Tata Steel in Port Talbot as part of a £1.25 billion transformation deal. The government acted in April 2025 to safeguard 2,700 jobs at British Steel in Scunthorpe. Alongside DBT’s settlement, funding to support the government’s commitment to invest further in the steel sector will be allocated when the steel strategy for the sector has been finalised.
Read the full Spending Review here: https://www.gov.uk/government/publications/spending-review-2025-document/spending-review-2025-html
