By Younes Fegheh-Hassanpour PhD., R&D Manager at RCK Partners
The UK’s pharmaceutical industry is at a critical juncture.
A post-pandemic rebound has seen export values climb back to £26.1 billion in 2023, but beneath this promising headline, challenges persist.
Once a global leader, the UK now trails in tenth place for pharmaceutical exports as challenges like Brexit and ongoing supply chain issues further hinder Britain’s growth in the sector.
In July 2025, the Government published its Life Sciences Sector Plan as part of its flagship Industrial Strategy.
The plan sets out a ten-year mission to harness British science and innovation to deliver long-term economic growth and a stronger, prevention-focused NHS.
Investment is certainly increasing in the sector, with the Chancellor re-committing up to £520 million for the Life Sciences Innovative Manufacturing Fund at the Spending Review to pull investment into the UK.
However, the issue isn’t simply one of trade or policy; it’s about ensuring the UK’s small and medium-sized pharmaceutical firms – the disruptors – have the tools they need to innovate and succeed.
Without a thriving SME ecosystem, the pipeline of breakthroughs that powers our sector will falter.
As it stands, compared to Germany and Sweden, the UK now lags in Gross Domestic Expenditure on R&D (GERD) and Business Enterprise Expenditure on R&D (BERD) as a percentage of GDP, and this decline in SME support could risk further undermining the UK’s attractiveness to investment in R&D.
So how can we embrace the full potential of the UK’s pharmaceutical sector?
Younes Fegheh-Hassanpour
Understanding the innovation gap
Numerous obstacles are in place for UK pharmaceutical companies, creating a marked difference between the UK’s R&D potential and its actual output, known as an innovation gap.
Scientific innovation is costly, risky, and resource-intensive for any business, but for SMEs, these pressures are magnified.
For example, in the pharmaceutical sector, SMEs are key drivers of drug discovery, preclinical development and early-stage clinical development.
However, it is also these stages in which experiments, and scientific research are most likely to end up in failure.
The nature of pharmaceutical R&D is inherently high stakes.
Studies suggest that as much as 85% of health research is ultimately “wasted”, whether through failed experiments, duplication of efforts, or flawed methodology.
Globally, this equates to roughly $200 billion in lost investment each year.
For large firms, such losses can be absorbed. For SMEs, they can be catastrophic.
Enabling innovation across the sector
What’s needed is a stronger, more resilient innovation ecosystem that supports risk-taking while reducing unnecessary waste.
Effective collaboration through knowledge-sharing is one solution to drive progress more quickly.
For example, the creation of a shared database where lessons and failures can be learned more easily would reduce the number of failed experiments, and saved resources could instead be directed towards new testing.
That said, the infrastructure meant to support innovation is also underperforming.
The UK’s slow integration of advanced technologies like AI and machine learning into the pharmaceutical sector puts it at a disadvantage amongst the global market.
Cutting-edge tools that could accelerate drug discovery remain underutilised, while countries such as Germany and Denmark forge ahead with integrated digital systems that drive collaboration and efficiency.
Furthermore, Denmark and Sweden have fully integrated EHR systems that facilitate seamless data sharing, while data from DMS Group shows that only 25 per cent of NHS trusts in the UK are fully digitised despite 88% having access to digital systems.
It is precisely this gap between the potential and the realised that creates the innovation gap and puts the UK at a disadvantage on the global stage.
Moreover, there remains further investment needed to not only integrate these solutions but also to upskill the workforce in order to leverage their full potential.
Closing the innovation gap is not just about funding – it’s about creating the conditions for innovation to thrive.
SMEs hold the key to reigniting innovation in the sector, but they cannot do it alone.
A concerted effort is needed from policymakers, industry leaders, and researchers to address systemic challenges and build an ecosystem that fosters collaboration, embraces technology, and prioritises investment.
By championing these changes, the UK can remain competitive in the sector and retain its position as a global leader for pharmaceuticals, driving breakthroughs that will benefit both the economy and global scientific advancement.
