Merck scraps £1bn R&D hub amid fears UK is ‘uninvestable’

US PHARMACEUTICAL giant Merck has axed plans to launch a £1bn (US$1.35bn) research & development (R&D) centre in London. The decision, announced on Wednesday, was followed yesterday by a report from the industry’s lobby group warning the UK had become “uninvestable” for pharmaceutical R&D.

Merck, trading as MSD in Europe, also announced it will be leaving its laboratories at the London Bioscience Innovation Centre and the Francis Crick Institute by the end of the year with the loss of 125 jobs. A spokesperson for the company blamed the decisions on the “undervaluation of innovative medicines and vaccines by successive UK governments”.

Sharon Todd, CEO of the Society of Chemical Industry, said Merck’s announcement “should be setting off alarm bells in government”. A UK government spokesperson said: “We recognise that this will be concerning news for MSD employees and the government stands ready to support those affected.”

The Association of the British Pharmaceutical Industry’s (ABPI) report said that growth in UK pharmaceutical R&D has underperformed compared to other countries, growing 1.9% annually since 2020, compared to a global average of 6.6%. It added that the £795m of foreign direct investment into the UK life sciences sector in 2023 was 58% lower than in 2017.

The ABPI argued that high “clawback” rates on UK pharmaceutical revenues, currently 23.5% compared to 5.7% in France and 7% in Germany, make R&D investment unattractive. Rippon Ubhi, general manager for speciality care for French pharmaceutical Sanofi’s UK and Ireland business, said it depicted the UK as being “uninvestable in global boardrooms”.

The ABPI stressed that the UK stands out for its academic institutions, noting the country hosts 16 of the world’s top 100 universities for life sciences and medicine. The report also pointed to the country’s “world-class research infrastructure” such as the UK Biobank dataset, and that the UK has a “rich ecosystem” of startup biotechnology companies with 399 spinouts created in 2024. The report highlighted the US$10bn in early investment raised by UK-based biotech startups between 2017 and 2024, more than anywhere else in Europe.

However, Ijeoma Uchegbu, a professor in University College London’s school of pharmacy, warned that “science ecosystem” relies on both academia and industry. The loss of Merck’s new facility means collaborations between industry and academia will decline, and innovation will be “hampered”, she warned.

The ABPI criticised the low uptake of new medicines on the UK’s NHS, noting that only 37% become fully available for their licensed uses, compared to 90% in Germany.

NHS uptake of approved treatments is largely driven by cost-effectiveness assessments – a system that, according to Novartis UK & Ireland director Johan Kahlström, “continues to block patient access to breakthrough treatment”.

He called for the government to “reset the UK’s approach and restore its position as a global leader in life sciences”. Nico Reynders, general manager of Belgian pharmaceutical UCB, said: “This is most devastating for patients who are increasingly at risk of not being able to access innovative treatments available elsewhere in the world.” He added it was “also detrimental for the wider UK economy”.

Merck’s decision to divest from the UK echoes a similar decision from AstraZeneca, who in January scrapped plans for a £450m upgrade to its vaccine manufacturing plant in Liverpool, instead looking to countries with “more favourable conditions”.

Todd said: “We have seen an increasing number of industrial plants shutting down due to the UK’s high energy prices, resulting in loss of jobs and competencies. The loss of Merck together with statements from AstraZeneca this summer that it is considering relisting in the US are major markers of the lack of competitiveness in the UK should be setting off alarm bells in government.”

This summer, the UK government identified life sciences as one of eight key pillars in its Industrial Strategy. Responding to the ABPI’s report, the government highlighted German drug developer BioNTech’s decision to commit £1bn in the UK to build two R&D facilities and an AI hub.

A government spokesperson said: “Through our life sciences sector plan, we’re taking decisive action to further unlock innovation, drive investment and boost growth”. They added that they have “already started delivering on this work”, through a joint £600m investment in the Health Data Research Service with the Wellcome Trust, and a £500m investment from a property developer to expand the Cambridge Biomedical Campus. However, Todd warned that “the Industrial Strategy is meaningless without real policy actions that will drive economic growth”.

American dreams

Merck began construction of its R&D site – focusing on neuroscience, inflammation and immunology – in King’s Cross, London in 2023, with plans to open in 2027. The Financial Times reports that Merck expects to relocate R&D activities planned for London to existing sites, predominantly in the US.

US investment from multinational pharmaceutical firms has surged this year, driven in part by fears over potential tariffs. While medicines remain exempt from the wave of tariffs ordered by Donald Trump in May, the US president has repeatedly threatened to impose them – most recently proposing rates as high as 250%.

Multinational pharmaceuticals have invested more than US$200bn in the US since Trump’s election, including a US$50bn commitment from AstraZeneca in July.