The economic challenges facing UK life sciences investment

Chancellor Rachel Reeves recently visited Siemens Healthineers in Oxford to present a vision for revitalising Britain’s economic growth. Highlighting the nation’s potential in areas such as artificial intelligence and life sciences, Reeves pointed to companies like AstraZeneca and DeepMind as key contributors to job creation and investment. Yet, her optimism was swiftly overshadowed as AstraZeneca confirmed it would cancel a £450m vaccine plant investment in the UK. The decision followed disputes over state aid and reflects deeper frustrations within the pharmaceutical sector.

AstraZeneca’s Chief Executive, Sir Pascal Soriot, linked the withdrawal solely to insufficient government support, with the company rejecting a £78m aid offer. However, Soriot acknowledged broader issues, stressing that Britain must improve its investment environment to remain competitive globally. Industry leaders argue that the UK has become less attractive for pharmaceutical companies due to restrictive policies on medicine spending and investment incentives.

Data reveals significant cuts in NHS spending on branded medicines, which has declined by 11 per cent in real terms over the last decade, even as the overall health budget grew by 33 per cent. Comparably, countries like Germany and France devote a higher percentage of healthcare funds to branded treatments. These measures, intended to maximise taxpayer value, have led to slower adoption of new drugs, such as AstraZeneca’s breast cancer treatment Enhertu, which remains unavailable in England despite approval elsewhere. Five-year cancer survival rates in the UK lag behind other developed nations, exacerbating these concerns.

Compounding the issue, pharmaceutical companies face rising costs through a sales rebate system that requires them to subsidise NHS spending beyond agreed limits. This year, the government demanded £3.6bn in rebates, drawing sharp criticism from industry figures who argue that such measures stifle growth potential. The sector has called for an overhaul of the rebate programme and for policies that could foster a more favourable investment climate in the UK.

Many pharmaceutical leaders fear that continued neglect of these issues will drive companies away, particularly in sectors like clinical trials and new drug development. Though the government has announced a £520m fund for life sciences manufacturing, critics believe more substantive action is needed to restore confidence and ensure the sector can thrive as a key contributor to Britain’s economic future.

The government insists it is committed to supporting the life sciences sector, but industry leaders argue that policies must align with this ambition. Without significant reform, the current challenges could threaten the UK’s position as a global leader in science and innovation. Addressing these issues could unlock the significant potential Reeves envisions for the country’s economy