Merck’s move to axe £1bn UK expansion was ‘commercial decision’, says minister

The Government has insisted US drugs giant Merck’s move to ditch plans for a £1 billion London centre was a “commercial decision” as it came under fire for under-investment in the sector.

Merck, known as MSD in the UK and Europe, dealt a major blow to the UK’s life sciences sector on Wednesday evening when it announced it was scrapping a planned research centre in London’s King’s Cross, which was already under construction and due to open in 2027.

It is also moving its wider life sciences operation to the US in a move that will impact around 125 British jobs.

Merck blamed the Government for paying too little for medicines and not investing enough in the sector.

Science minister Ian Murray told MPs in the Commons that the decision was “deeply disappointing” but said it was partly down to three billion US dollars (£2.2 billion) of planned cuts to Merck’s annual operating costs.

Answering an urgent question on the matter, Mr Murray said: “As a significant life sciences company which employs more than 1,600 people … Merck, known as MSD in the UK, is a valued partner to this Government and a key player in the life sciences eco-system.

“MSD’s decision to not progress its investment in King’s Cross is therefore deeply disappointing and a commercial decision for them.”

He pointed to ongoing cost-cutting at Merck, which last month announced it was axing around 6,000 jobs worldwide – seen as a response to concerns over the upcoming loss of patent protection for its blockbuster cancer treatment.

Mr Murray also said there had been changes in “US and international fundamentals” that is having a bearing on the life sciences sector.

He insisted that falling spending on NHS medicines was due to previous Conservative governments, as it had dropped from 15% to 9% in the last 15 years.

Shadow science secretary Julia Lopez said Merck’s decision should send alarm bells ringing across Government, following Cambridge-based AstraZeneca’s decision earlier this year to abandon plans to invest £450 million in a plant in Merseyside.

Ms Lopez said: “The message from Merck’s executives was unsparing, simply put, the UK is not internationally competitive.

“The Government must wake up and do so now.

“If AstraZeneca’s announcement on investment was the canary in the mine for UK life sciences, then last night’s investment should be a klaxon sounding across Whitehall.”

Mr Murray denied there was an issue, telling MPs: “The UK has become the most attractive place to invest in the world, but of course there is a lot more for this Government to do.”

He added: “MSD will continue to be a key investor in the UK … I welcome their continued investment in clinical trials and their significant partnerships with our institutions such as Our Future Health.

“MSD will continue to employ 1,600 people. We remain closely engaged with MSD as we take forward our life sciences sector plan and the 10-year NHS plan.”

The news came as research indicated the UK has lost ground against other countries regarding investment in pharmaceuticals and life sciences.

A study from PwC and the Association of the British Pharmaceutical Industry (ABPI) pointed towards weaker investment in recent years, with a particular fall in foreign funding.

The research indicated UK pharmaceutical investment has underperformed against global trends since 2018.

Latest figures showed that investment in R&D in the sector fell by nearly £100 million in 2023.

It also showed direct foreign investment into UK life science fell by 58% to £795 million from 2017 to 2023.

The data showed the UK ranked second for foreign investment in 2017 and 2021 compared with other countries, but fell to seventh by 2023.

ABPI chief executive Richard Torbett said the Government and industry need to work together to “remove existing barriers” in order to help the sector.

He said: “Without a more competitive environment for investment, we risk losing out to other countries making bold moves to attract internationally mobile investment.”