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3 hours ago
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The announcement in March last year that AstraZeneca would be investing £450m to expand its vaccine plant in Speke in Liverpool was presented in full flag-waving style by the company and the government of the day.
Sir Pascal Soriot, the AstraZeneca chief executive, reflected it had been 25 years since the merger of Astra of Sweden and Zeneca of the UK; the firm was now “truly global” but also “proud of our British roots.” Jeremy Hunt, then chancellor, said the £450m investment, plus £200m to expand its research facility in Cambridge, was “a vote of confidence in the attractiveness of the UK as a life sciences superpower”.
There were additional reasons for the boosterish tone. Relations between the life sciences industry and the Tory government had been dire in the two years after the Covid pandemic. Companies grumbled about research and development tax credits, the NHS’s spending formula for prescription medicines and a post-Covid hangover in the health service’s ability to conduct clinical trials. The Speke deal seemed to signal a reset.
It helped that the investment would be in vaccine-making capacity, the very thing the UK found itself lacking in the pandemic. And it was definitely useful that this was AstraZeneca. Only a year earlier, Soriot had blamed the UK’s “discouraging” tax rate for a decision to build a separate £320m manufacturing plant in Ireland rather than the north-west of England.
The only doubt over expansion at Speke came in the small print. The company’s final investment decision was “contingent upon mutual agreement with the UK government and third parties”. But that clause didn’t sound significant because both sides knew how the game is played. While at one level it is outrageous that a £175bn company such as AstraZeneca should expect a bung from the taxpayer, the reality in global pharma-land is that countries fall over themselves to offer incentives to build state-of-the-art facilities, especially the vaccine-making variety, that will be around for decades. You wouldn’t believe what Singapore will offer, pharma executives have said for years.
Now the Speke investment is off and the precise reasons are disputed, inevitably. “Several factors have influenced this decision including the timing and reduction of the final offer compared to the previous government’s proposal,” said AstraZeneca. Did the incoming Labour government, wielding the Treasury’s “value for money” formula, have good reasons to trim the £90m offer from the Tories? Possibly, if it turned out that AstraZeneca’s R&D spend would be lower than expected.
Yet the company’s reference to the “timing” of the final offer is significant, sources say. Note that the Times reported last month, after obtaining correspondence under the Freedom of Information Act, that AstraZeneca’s UK chair had warned the incoming government soon after the general election last July that getting the deal over the line was “an urgent issue as we need to begin work on the project in August in order to meet our business case timelines”.
Delay in Whitehall decision-making – as much as haggling over money – looks to have been key. If so, the timing of the general election didn’t help, but the killer may have been the failure to move quickly afterwards. The government can’t claim it was unaware of the risk of the investment slipping away. There were warnings aplenty, including from this column last August, that ministers should take the worsening mood music seriously and get the deal nailed down if it wanted to avoid being embarrassed.
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One can agree that the whole corporate subsidy show is murky and grubby – whether we’re talking about pharma plants, steel furnaces in south Wales or battery gigafactories in Somerset – and that the Treasury obviously has a duty to keep a lid on the largesse. But the bottom line here is that the outline terms were agreed and the goal was wide open.
Viewed from abroad, it must look bizarre that the UK’s largest company and an “unashamedly pro-growth” UK government have not been able to complete a major investment in a life sciences sector that is supposed to have a starring role in the new “modern” industrial strategy. Never mind the precise narrative of events – the advertising is terrible.
