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AstraZeneca turned down an offer of nearly £80mn in UK state support when it abruptly cancelled plans for a £450mn vaccine manufacturing site near Liverpool, according to people briefed on the matter.
The pharmaceuticals group, the UK’s most valuable listed company, rejected the government’s offer at a tense meeting on Wednesday afternoon, just hours after chancellor Rachel Reeves name-checked AstraZeneca in a speech as one of Britain’s “great companies”, the people said.
AstraZeneca also raised a number of unrelated issues with the government during negotiations about the planned vaccine plant in Merseyside, including the NHS’s rejection of its breast cancer drug Enhertu and the health service’s drug pricing mechanism, according to three people briefed on discussions.
The account of the breakdown of the negotiations provides new context for AstraZeneca’s statement on Friday that: “Several factors have influenced this decision including the timing and reduction of the final offer compared to the previous government’s proposal”.
Starmer’s Labour government sought last summer after taking office to reduce the amount of public money provided to the factory in Speke to £40mn, down from about £90mn promised by the former Conservative government.
The £90mn offer under the Tories was made up of £70mn in grants for the Speke factory and £20mn in research and development support from the UK Health Security Agency.
This month UK officials put forward a revised total offer of £78mn in financial support, according to people familiar with the matter.
The initial reduction in state support had come after government officials carried out due diligence on the level of R&D investment promised by AstraZeneca, according to multiple people familiar with the negotiations.
Officials concluded that the firm was proposing less investment than initially expected and as a result the government reduced its own proposed contribution, the people said.
AstraZeneca declined to comment. The Treasury said: “All government funding must demonstrate value for the taxpayer and a change in the investment proposed by AstraZeneca led to a reduced government grant offer being put forward.”
AstraZeneca’s decision to cancel the £450mn plant, which was billed as a centre to produce the next generation of vaccines for influenza and potentially emergent diseases, was a blow to Starmer and Reeves, who have sought in recent weeks to stress the UK’s attractiveness to business.
Labour before the July 2024 general election highlighted its pro-business credentials, including with a vow not to raise corporation tax. Though Reeves kept that promise at her first Budget, she also hit businesses with £25bn a year in increased national insurance contributions.
Kate Bingham, managing partner at venture firm SV Health Investors and former head of the UK’s Covid-19 vaccine taskforce, said the Speke factory cancellation “continues the lamentable theme where the government bites the hands that feed it”.
“The life sciences sector is supposedly a top priority for growth in the UK, yet the government seems to lack the right expertise and strategic mindset to strike a productive partnership,” she said.
The Tories seized on the cancellation, with shadow business secretary Andrew Griffiths saying: “There’s no vaccine for incompetence”.
One person close to AstraZeneca said that the relationship between the pharmaceutical industry and the UK government has become quite “toxic”, adding that “we have one of the worst commercial environments for pharmaceuticals in the Western world”.
AstraZeneca is investing heavily in the US, pledging $3.5bn late last year, as well as in other countries such as Singapore and Canada.
Last year, England’s healthcare spending watchdog refused to recommend AstraZeneca’s breast cancer drug Enhertu for use by the NHS, arguing that the price was too high. It was the first breast cancer drug the National Institute for Health and Care Excellence had rejected in over six years.
Drugmakers including AstraZeneca have also grown frustrated with the NHS after a clawback tax unexpectedly soared this year, reducing the profits pharmaceutical groups could make from selling new drugs to the UK government.
The industry association’s chief executive and board met with health secretary Wes Streeting last month to complain about having to pay 22.9 per cent of their UK sales back to the government this year, far more than the 15 per cent predicted.
NHS England said purchases of potentially curative cell and gene therapies, and medicines for conditions including cancer, diabetes, eye diseases rose more than expected in 2024, which led to the rise in the tax rate.
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