Merck and AstraZeneca’s decisions, reflects broader industry exodus as drugmakers cite government undervaluation, lack of competitive environment and prioritise US investment.
US pharmaceutical giant Merck has scrapped plans for a £1bn research centre in London and will lay off 125 scientists, citing the UK government’s failure to make “meaningful progress” in supporting the life sciences industry.
The decision to abandon the King’s Cross facility, which was already under construction and due to open in 2027, represents one of the most significant pharmaceutical divestments from the UK in recent years and delivers a fresh blow to the government’s growth agenda.
The UK is not internationally competitive
“Simply put, the UK is not internationally competitive,” Merck told the Financial Times, adding that the move “reflects the challenges of the UK not making meaningful progress towards addressing the lack of investment in the life science industry and the overall undervaluation of innovative medicines and vaccines by successive UK governments”
The company, known as MSD in Europe, will relocate its UK research operations to existing sites, primarily in the United States, where the Trump administration has been pressuring pharmaceutical companies to increase domestic investment
Merck will also vacate existing laboratories at the London Bioscience Innovation Centre and the Francis Crick Institute by the end of the year.
Companies prioritising US investment over UK
Merck’s withdrawal is the latest in a series of pharmaceutical companies reducing their UK footprint while simultaneously announcing major US investments, following AstraZeneca’s dramatic decision earlier this year to abandon a £450m expansion of its Merseyside vaccine manufacturing plant.
Since the AstraZeneca setback, the UK’s largest pharmaceutical company by market capitalisation has announced a $50bn investment in US manufacturing and R&D, stating the decision “underpins our belief in America’s innovation in biopharmaceuticals”. AstraZeneca CEO Pascal Soriot has also reportedly considered moving the company’s stock listing from London to New York.
The trend reflects mounting pressure from President Trump, who has threatened tariffs of up to 250% on pharmaceutical imports and signed executive orders aimed at reducing drug prices for American consumers while pressuring companies to increase domestic investment. Pharmaceutical companies have been shoring up investments in the US amid the Trump administration’s tariff threats and pressure to move more manufacturing to the US.
Merck’s decision to relocate UK operations to the US aligns with the company’s broader $9bn investment plan in American facilities through 2028. The pharmaceutical giant opened a $1bn facility in North Carolina in March and is constructing another $1bn plant in Delaware to produce its blockbuster cancer drug Keytruda, expected to create over 4,500 jobs by 2028.
Source: The Economist Intelligence Unit
AstraZeneca’s announcement in January came just two days after Chancellor Rachel Reeves set out Labour’s plan to go “further and faster” to boost economic growth, delivering an embarrassing blow to the government’s investment agenda. The Cambridge-based drugmaker blamed “the timing and reduction of the final offer compared to the previous government’s proposal” after what it described as “protracted” talks with officials.
The Treasury defended its position, saying a change to the “make-up of the investment” that had originally been proposed led to the government grant being reduced. “All government grant funding has to demonstrate value for the taxpayer, and unfortunately, despite extensive work from government officials, it has not been possible to achieve a solution,” a Treasury spokesperson said.
Pricing Disputes and Government Relations
The industry’s frustrations have been building over successive pricing disputes with the UK government. Last month, negotiations between drugmakers and Health Secretary Wes Streeting over a branded medicine pricing deal collapsed after the two sides could not agree on the size of rebates paid back to the government.
Under the current voluntary pricing and access scheme, companies must pay back a portion of revenue from newer, branded drugs. The rebate rate soared unexpectedly to 22.9% in 2025—well above the anticipated 15%—forcing pharmaceutical companies to return nearly a quarter of their UK sales to the state-run health system. This compares unfavorably with rebate rates of 5.7% in France and 7% in Germany.
Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry (ABPI), described Merck’s decision as “a real blow” to the UK’s life sciences ambitions. “This news must be used as an opportunity to reflect on what factors are driving companies to make such difficult decisions, and what this country can do to ensure it is attracting the high-quality investment we need and not driving it away,” he said.
Declining Competitiveness by the Numbers
New research from the ABPI and consulting firm PwC reveals the extent of the UK’s declining competitiveness in pharmaceutical investment. Foreign direct investment in UK life sciences fell 58% to £795m between 2017 and 2023, causing the country to drop from second place globally in 2017 to seventh place in 2023.
Inward life sciences foreign direct investment (£ million)
According to the ABPI, investment in life sciences research and development has significantly underperformed against global trends since 2018. The rate of R&D investment growth fell to just 1.9% annually from 2020, down from 6.3% in the three preceding years and lagging behind the global average of 6.6%. In 2023, R&D investment by the pharmaceutical industry actually declined by nearly £100m.
The UK has also lost ground in clinical trials of new medicines, ranking eighth for late-stage industry trials in 2023, down from fourth place in 2017. Perhaps most concerningly for patients, only 37% of new medicines are made fully available for their licensed indications in the UK, compared with 90% in Germany.
Impact on Patients and Access
The investment flight has real-world consequences for patient access to cutting-edge treatments. ABPI data shows that more than 60 medicines either did not launch in the UK or were delayed between 2019-20 and 2022-23.
Rippon Ubhi, who runs Sanofi’s UK and Ireland business, said the findings “paint a concerning picture for UK patients and our economy. The UK is increasingly being viewed as ‘uninvestable’ in global boardrooms due to unprecedented NHS clawback rates and restrictive patient access to medicines”.
Johan Kahlström, UK head of Swiss pharmaceutical firm Novartis, has similarly warned that high costs mean the UK is “largely uninvestable,” while noting that his company has “already been unable to launch several medicines” in the country due to the “declining competitiveness” of the UK market.
Government Response Under Pressure
A spokesperson for the UK government defended the UK’s investment climate, stating: “The UK has become the most attractive place to invest in the world, but we know there is more work to do. We recognise that this will be concerning news for MSD employees and the government stands ready to support those affected”.
However, the government faces mounting pressure to address the industry’s concerns, particularly given the broader economic challenges facing the country. Labour has made boosting the UK economy its main objective in a bid to raise living standards, but growth has remained sluggish despite the party’s ambitious rhetoric.
Sir Keir Starmer’s administration has identified life sciences as one of eight “growth-driving” sectors in its flagship industrial strategy and set ambitious targets to position the UK as the leading life sciences economy in Europe by 2030 and third globally by 2035.
Dr David Roblin, chief executive of London-based biotechnology company Relation Therapeutics, argued that fundamental strengths remain. “The academic environment in the UK continues to produce innovative ideas and people to run with those ideas, which attracts foreign investment. The environment to do research is still outstanding: we’ve got great academics, the NHS does provide a research platform,”
However, he acknowledged that the political landscape has shifted dramatically. “What has changed was the political landscape in the US which big pharma has to respond to, because the US remains the largest market for pharmaceuticals on earth” (Source: BBC).
Merck’s warning that “more and more companies will be making these sorts of decisions” unless the operating environment improves suggests the UK faces a critical juncture in maintaining its position as a global life sciences hub.
