The New Frontier - Your weekly science and innovation update – 2nd October 2026

Mood swings

The Lloyds Business Barometer shows overall UK business confidence falling 12 points to 41% in September, its lowest level since April 2025, although confidence remained above the survey’s long-term average. Economic optimism dropped 18 points to 31%. The balance of firms planning to hire slipped to 34%, the lowest since January 2025.

Manufacturing confidence (down 19 points to 36%) and services confidence (down 21 to 35%) took the heaviest hits. The cause is familiar: energy and increased global uncertainty. 

For property, a sharper focus on costs and less immediate need to expand capacity point to some relocations being deferred and more demand for lease flexibility. But this is a pause, not a universal retreat: sentiment can change quickly, and demand remains highly sector-specific.

Power struggle

Given that energy is a big concern for occupiers, it was no surprise that one of this week's biggest policy ideas was about the price and availability of power.

The Prime Minister's headline announcement was Great British Grid. It is a publicly owned network company within Great British Energy, with a reported £4bn to start. It will not replace the private operators. It will work alongside them, co-investing in tendered transmission projects and in businesses' own connection works. It will aim to speed up grid connections. The government has set an ambition to bring UK energy costs closer to those of other European countries over the next decade.

The need is plain. Ofgem says applications to connect new demand rose from 41GW to 125GW in under a year. Labs, factories and campuses all have to join that queue. As my colleague Flora Harley notes in her weekly note: “If reforms improve transparency and accelerate reinforcement, they could help unlock investment across real estate, advanced manufacturing, data centres and clean energy at a time when demand for electricity is rising faster than the infrastructure needed to support it.”

The government also wants money spent on power and other utilities to stay at home. Energy and water utilities have been told to favour UK jobs and suppliers. That covers about £70bn of transmission spending and £104bn of water investment, and legislation is threatened if they don't comply. 

Made here, defended here

Despite the gloomier business sentiment reported by Lloyds, this week brought a series of major public and private investment announcements. Together, they point to a push to strengthen sovereign capability in defence, advanced manufacturing, semiconductors and space, with implications for the specialist industrial and R&D facilities needed to support it.

On defence, Chancellor John Healey confirmed that Rolls-Royce will invest £300m across five UK aerospace and defence sites:

• Derby: £140m
• Bristol: £90m
• Inchinnan: £43m
• Rotherham: £19m, plus £2m from the South Yorkshire mayoral authority
• Ansty: £5m

Healey also confirmed £6bn of shipyard contracts to fund new docks for the next generation of submarines.  

The latest figures from the MoD show that in 2025/26, £43.4bn was paid by the MoD Core Department to UK- and foreign-owned organisations, an increase of 3.2% on the previous year. Elsewhere, new research by White & Case, based on a survey of UK defence companies and defence technology start-ups, reveals that 97% believe the UK is the leading European destination for defence tech investment. That view is matched by significant investment plans across the sector, with more than a quarter (27%) of firms planning to invest over £100m over the next 12 months, while 67% expect to invest between £50m and £100m, taking average planned investment to £79m. These investment plans are being driven by the need to maintain competitiveness (50%), demand for next-generation defence technology (42%), export opportunities (38%) and rising government defence spending (33%). The UK’s position as a leading investment hub is also reflected in companies’ growth plans, with more than three-quarters (76%) intending to expand in the UK over the next 12 months, ahead of Europe at 55%, the US at 27%, and the Middle East and APAC at 26% respectively.

In Scotland, MoD spending with industry has exceeded £2.5bn, up 13% in real terms. Equivalent to £460 per person, it supports 12,200 jobs, while spending on electronics has risen by a third. Defence Secretary Wes Streeting said the UK could not strengthen its deterrence without a strong sovereign defence industry and gave a “cast-iron” guarantee that core defence spending would rise to 3.5% of GDP by 2035. Meanwhile, the EU approved its first five Defence Projects of Common Interest, covering drones, the seabed, space, air and missile defence, and an “Eastern Flank Watch”. Britain will be watching closely to see how far these projects are opened to non-EU suppliers.

For semiconductors, the Compound Semiconductor Applications Catapult has been relaunched as the Semiconductor Catapult. With labs in Newport, Bristol and Glasgow, its expanded remit covers AI hardware and defence. It forms part of the £1.1bn AI Hardware Plan, alongside £750m for a national supercomputer, £400m for chips and £150m from the British Business Bank for hardware firms. The UK chip sector already generates around £10.6bn in turnover across 297 companies.

Space investment follows the same pattern. A University of Sussex-led team, including RAL Space, Cardiff and Imperial, has secured roles on NASA's $1.2bn PRIMA telescope, backed by £3.3m. Separately, a new UK Space Landing Pad at IDEALondon will help five overseas space companies establish a UK presence.

For real estate, this investment pipeline creates a clear opportunity, but also a delivery challenge. Much of the demand will be for specialist industrial and R&D facilities rather than conventional offices, and this space is harder to deliver. Owners of high-specification, power-ready stock near these hubs therefore have a compelling proposition.

Wet behind the AI

Hard numbers on AI in drug discovery are starting to arrive. At its Pharma Day on Monday, Roche reported that lead-identification entries rose about 2.5 times between 2022 and 2025 with no extra resources, and the cycle time halved. AI or computational work fed into 40% of recent pipeline decisions, and Roche now runs more than 3,500 NVIDIA Blackwell GPUs. Novo Nordisk told investors that it had improved the potency of a once-monthly amylin 500-fold in three design rounds, testing about 2,000 molecules. It now aims for more than 15 first-in-human studies a year, against a historical average of 6.5.

The same companies insist that the lab isn't going anywhere. Anthropic has opened a wet lab for biology. Its head of life sciences says, “The final test is still, and will be for a while, in real lab work.” It is also noteworthy that equipment suppliers such as Revvity and 10x Genomics say AI-driven data generation is lifting their order books. Firms along the AI-powered drug discovery supply chain are worthy occupier targets.

Money with an accent

Foreign-backed investment in UK private companies approached £10bn in the first half of 2026, according to Beauhurst and Barclays. Since 2016, overseas investors have taken part in fewer than 10% of deals but supplied £127bn, more than half of all equity raised. AI featured in 44.4% of foreign-backed deals, up from 24.3% in 2023. The United States is by far the dominant source of foreign equity investment into UK companies, with US investors involved in 6,189 deals between 2016 and H1 2026, almost six times the next largest source. 

Domestic capital continues to build, though. The British Business Bank has committed £135m to two Advent Life Sciences funds: £60m for the early-stage Fund IV and £75m for the Growth Fund. That takes its life sciences commitments to £745m across 17 funds. Its own analysis shows UK venture funds now matching US long-term returns at 1.78x, and newer UK funds ahead at 1.40x against 1.24x.

Manchester means business

Greater Manchester climbed two places to rank third in the UK for foreign-investment attractiveness, with a score of 49.4, behind only London and Edinburgh. Its strongest advantage remains talent: the city-region ranked second for Local Skills, supported by the Index’s second-largest economically active population. Manchester itself rose from ninth to sixth place after recording a 12-point improvement in its Local Skills score, the largest gain across any pillar of the Index.

That skills base is increasingly being matched by investment in innovation and infrastructure. Five Greater Manchester projects spanning applied AI, advanced materials, life sciences and health data secured £50m through the Local Innovation Partnerships Fund, with every £1 of public funding expected to attract £4 of private investment. The city region has also begun deploying its Good Growth Fund across housing, transport, laboratories and employment space.

Manchester’s growing international profile will receive a further boost when it hosts the G20 Leaders’ Summit at Manchester Central on 27 and 28 November 2027. 

The missing middle of OxCam

A Public First report for the Oxford-Cambridge Supercluster Board shows where the corridor leads and where it falls short. OxCam leads in generating knowledge, skilled people and new companies, particularly relative to its size. It falls behind in the mechanisms that turn those assets into locally anchored economic scale: later-stage capital, commercial demand, corporate depth, affordable housing, power, transport and coordinated delivery.

In other news

• The MoD will extend and combine two contracts with Marshall Land Systems for aircraft arrestor gear, worth £7.5m to 2028. Only Marshall holds the drawings. The company announced in May that it will move its manufacturing more than 200 miles from Cambridge to Wales.  Moving manufacturing will reduce costs and provide long-term sustainability.
• On the Humber, Centrica, Equinor, National Gas and SSE Thermal say a hydrogen cluster could add £17bn and 54,000 construction jobs. That depends on the Budget launching the £500m competition for hydrogen transport and storage.
• The contest for AI leadership is tightening. Paris edged London by 0.2 points to become Europe's top AI city in the Observer's AI Cities Index, though London still leads on the number of companies and on speed to market.
• Zenithon AI, a new AI lab in London, has raised $10m to build the first world models for extreme physics.
• Nscale raised $3.36bn in convertible notes ahead of an IPO for its artificial intelligence cloud infrastructure.
• Oxford is once again the world's best university in the Times Higher Education rankings, with Cambridge 5th, Imperial 8th and UCL back in the top 20. But the UK has one fewer institution in the top 200, down to 25, and Times Higher Education warns that money problems threaten its standing. Edinburgh is this week's example: it is closing more than 90 courses as part of a £140m savings drive.
• Metaview, a London-based agentic recruiting platform that automates sourcing, application review, interviewing, reporting and hiring workflows, has raised €53.1m ($60m) in Series C funding.