GlaxoSmithKline invests $361 million in UK despite Brexit
GlaxoSmithKline plans £275 million ($361 million) of new investments at three drug manufacturing sites in Britain, signaling its confidence in the country despite last month’s vote to leave the European Union. Britain’s biggest drugmaker, which had argued against Brexit before the referendum, believes the UK remains an attractive place for making medicines, thanks to a skilled workforce and relatively low tax rates. The country’s so-called patent box boosts profits from patented innovations by halving the rate of corporation tax. This tax relief, which favors pharmaceutical companies, has come under fire in recent days from the opposition Labour Party.
GSK said yesterday it was investing in sites at Barnard Castle, in the north of England, Montrose, in Scotland, and Ware, north of London. It plans to increase production of next-generation respiratory drugs and biotech medicines. The vast majority of these products will be exported. “It is testament to our skilled UK workforce and the country’s leading position in life sciences that we are making these investments in advanced manufacturing here,” said Chief Executive Andrew Witty.
Business minister Greg Clark said GSK’s move was a clear vote of confidence in Britain and demonstrated that “there really is no place better in Europe to grow a business”. The company, which will report quarterly results at 1100 GMT, has a large part of its global research and manufacturing cost base in Britain, even though nearly all its sales are generated overseas. Witty, who is retiring next year, had said before the vote that Britain should remain in the EU, due to fears that Brexit could disrupt Europe’s unified system for drug regulation and hamper access to top scientific talent.
Helped by Sterling fall
Despite this, the company, which will be helped by recent falls in sterling, has concluded that the country remains a good place to do business. Britain accounts for nearly half of GSK’s worldwide research and development and around a third of its manufacturing. It has a total of nine UK manufacturing sites employing some 6,000 staff. Uncertainty surrounding the vote to leave the EU in last month’s referendum has raised fears over corporate investment in Britain, which some economists fear could exacerbate difficult times ahead as the government negotiates future trade relations.
GSK’s substantial investment therefore gives some reassurance and follows signs that foreign buyers, lured by a plunge in the pound, are looking to snap up bargains in Britain, led by Japanese group SoftBank’s $32 billion swoop for chip designer ARM Holdings. The board of French utility EDF, meanwhile, will meet on July 28 to consider a final investment decision on its $24 billion Hinkley Point C nuclear project in Britain. The pharmaceuticals industry is a notable success story for Britain, directly employing more than 70,000 people and accounting for 25 percent of all business research and development spending. Witty, together with AstraZeneca CEO Pascal Soriot, chairs an industry task force set up by the government to address regulatory and other issues facing the pharmaceutical sector following Britain’s decision to leave the EU. GSK said the new investments would create some new jobs but it did not give a number. At Barnard Castle, it will spend 92 million pounds on a sterile facility to make biotech drugs, while Montrose will get 110 million for a new unit making lung drug ingredients, and 74 million at Ware will expand production of its Ellipta inhaler. — Reuters