American pharmaceutical giant Merck has decisively withdrawn plans for a £1 billion drug research centre in London’s King's Cross, citing that Britain is “not internationally competitive.” This cancellation, announced recently, marks a significant setback for the UK’s life sciences ambitions and will result in the loss of around 125 scientific and support jobs. Merck, operating in the UK under the name MSD, indicated that its decision stems from the UK government's failure to adequately invest in the life sciences sector and to properly value innovative medicines and vaccines, choosing instead to relocate this research activity to the United States.

The decision underscores broader concerns within the British pharmaceutical industry about the country’s shrinking appeal for foreign investment. The Association of the British Pharmaceutical Industry (ABPI), which released a critical report alongside consultancy PwC, highlights that Britain has plummeted in global rankings for medical research investment—from second place in 2017 down to seventh in 2023. Despite being a world leader in research and education, the UK allocates just 9% of its healthcare spending to medicine development, lagging significantly behind countries like Japan and the US, where the figures stand at 20% and 15% respectively.

This downward trend in investment is aggravated by fraught relations between drug manufacturers and the UK government over the National Health Service’s (NHS) rebate scheme. Under this scheme, pharmaceutical companies must return 23.5% of revenue generated from NHS drug sales—an unusually high “clawback” rate that industry executives argue is pricing the UK out of the market in global boardrooms. Sanofi’s Rippon Ubhi expressed in a statement that this high clawback rate, coupled with restrictive patient access to new drugs, is causing the UK to be viewed as “uninvestable.”

Merck’s announcement to scrap the London centre was further described as reflecting a broader U.S. investment strategy rather than being directly linked to recent NHS drug-pricing negotiations, although tensions remain elevated. The firm warned that unless the UK improves its operating environment—including government support and valuation of innovative medicines—more companies are likely to make similar decisions to withdraw or scale back investments.

The government’s ambitions to develop the UK as a life sciences powerhouse by 2030 and beyond now face a stark challenge. The ABPI cautions that without substantial commitment to increased investment in new medicines, these goals will remain out of reach. The sector’s struggles are reflected in the UK losing an estimated £15 billion a year to more attractive overseas markets, with significant declines in the UK’s share of the global clinical trials market.

This development compounds recent signals of waning confidence from major British and international industries. It follows similar announcements, such as Sir Jim Ratcliffe’s Ineos chemicals firm halting further investment in the UK, and comments from former Marks & Spencer boss Stuart Rose warning that the country’s economic trajectory is nearing a crisis point under the current administration.

In response to Merck's latest move, ABPI chief executive Richard Torbett described it as “a real blow to the UK's life sciences ambitions” but urged that it should serve as a crucial moment to reflect on what is driving companies away. The pharmaceutical sector’s warning highlights the urgent need for policy reforms if the UK is to maintain its historical leadership in science and innovation and remain an attractive destination for global pharmaceutical investment.

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Source: Noah Wire Services