Could the UK’s new capital grants program for life sciences create opportunities for broader dealmaking?
The UK government has just released its eligibility criteria for a new Life Sciences Large Investment Portfolio (LSLIP) scheme, promising £570 million in subsidies for companies investing £250 million or more in UK-based manufacturing and R&D.
LSLIP launches at a time of unresolved tensions in the commercial environment for pharma in the UK. Yet for those in a position to move, that very context creates opportunities – with an embattled government seeking to shift toward bespoke, high-value partnerships with individual companies.
Negotient’s Chris Brown says this creates a landscape where negotiation, strategic alignment, and commercial realism are essential: ambitious investors need not see the LSLIP in isolation; rather, it is a platform for strategic negotiation, offering rewards for those willing to be propositional across subsidy structuring, strategic partnerships, regional innovation zones, regulatory acceleration and NHS procurement reform.
What’s on the table?
The LSLIP, first trailed in the Life Sciences Sector Plan, has moved closer to reality with the Office for Life Sciences (OLS) submitting a proposed scheme structure to the Competition and Markets Authority. If approved, the scheme will provide direct grants covering a percentage of project costs, with individual awards capped at £130 million. Eligible companies must be UK-registered, private-sector entities in medicines, MedTech, or diagnostics, with a proven track record and a commitment to invest at least £250 million over three years.
The fund provides a ‘larger company route’, giving officials a more streamlined and flexible means to ink major deals. Those behind the scenes tell us that ministers are determined to “avoid another Speke” - the collapse in February of AstraZeneca’s proposed £450m vaccine investment facility in Liverpool, blamed on delays in finalising the terms of government’s co-investment.
The LSLIP doesn’t exist in isolation - it complements other vehicles like the Life Sciences Innovative Manufacturing Fund (LSIMF). While LSIMF largely targets earlier stage manufacturing innovation, LSLIP is geared to large-scale, strategic investments. The two can even be sequenced or combined to support a full innovation lifecycle: for example, a company might use LSIMF to de-risk a novel manufacturing platform, then leverage LSLIP to scale it commercially — negotiating terms that reflect both technical risk and market potential.
A Welcome Signal — With Caveats
The LSLIP scheme is a bold move, but it arrives amid industry-government tensions, particularly around the Voluntary Scheme for Branded Medicines Pricing and Access (VPAG). While the government touts the UK as a competitive destination for life sciences investment, many firms are (to put it mildly) cautious — not just about subsidy access, but about the commercial environment that follows.
This has three implications:
1. Savvy companies have a unique opportunity to be more propositional – acting not as applicants but strategic negotiators to secure serious, lasting deals;
2. There is much greater potential than before for companies to negotiate deals that not only unlock public funding, but also shape market entry terms.
3. For the Government’s part, it needs to be bold, agile and creative in responding to the ideas of companies who want to find a way to make this work. It also needs to optimise the scheme carefully – where the insights published by CEPA for the ABPI on changes needed to appraisal methodology will be as relevant for the LSLIP as for the LSIMF.
Negotiation Opportunities: Where and How to Engage
Here are five key areas where negotiation opportunities are emerging:
1. Subsidy Structuring: LSLIP applicants must demonstrate that their proposed grant is the minimum required to proceed. This simultaneously:
Requires the ‘right’ financial cost modelling for public sector evaluators - Treasury and other HMG actors often interpret this differently than corporate finance teams expect — with a sceptical lens on assumptions, risk, and value-for-money.
Opens space for negotiation around risk-sharing and co-investment structures.
Demands a hard-headed, strategic negotiation mindset - understanding how the outside options of government and companies are shaped by competition for such investment from overseas, as well as competition for the funds from other companies.
2. Strategic Partnerships: the government aims to secure one major strategic partnership annually. This is a prime opportunity for firms to negotiate long-term collaboration, with influence over policy and adoption pathways.
3. Regional Innovation Zones: major investments open space to negotiate real commercial benefits at sub-national as well as national level – not least over site selection, local incentives, and integration with NHS transformation goals.
4. Regulatory Acceleration: engage with MHRA reform and international reliance routes to negotiate parallel approvals, scientific advice services, and AI integration to fast-track market access.
5. NHS Procurement Reform: with the introduction of the Innovator Passport and low-friction procurement, companies can negotiate early adoption, pricing models, and formulary inclusion — especially for MedTech and digital health solutions.
Critically, those who succeed will be those who are most effective at:
Identifying leverage points in regulatory, procurement, and subsidy frameworks;
Designing strategies that align public incentives with commercial goals;
Simultaneously managing the external negotiation process required to unlock these benefits, with that needed internally for investment decision-making.
Conclusion: Negotiation as Strategy
The most effective leaders will be those who do not treat the LSLIP as a funding opportunity, but as a strategic negotiation platform. Success will depend not only on eligibility, but on how well companies navigate the intersection of public incentives and commercial realities: it invites life sciences leaders to engage not just as applicants, but as strategic partners shaping the future of UK health innovation.
With formal launch of the scheme anticipated this Autumn, now is the time to prepare submissions, build coalitions, and define the terms of engagement — and to engage with partners who understand how to optimise in this evolving environment.