UK life sciences sector faces decline as Merck withdraws and investment slows

The UK’s ambition to become a global leader in life sciences is under threat as major pharma firms delay or cancel investments amid concerns over government policies and competitiveness, signalling a pivotal moment for the sector’s future growth.

The UK government’s recent proclamation that the country has become “the most attractive place to invest in the world” stands in stark contrast to the grim reality facing its life sciences sector, underscored by the withdrawal of US pharmaceutical giant Merck from plans to establish a £1 billion research centre in London’s King’s Cross. Merck’s decision to scrap the project, citing the UK’s lack of international competitiveness, highlights deep-seated issues that have left many industry leaders and experts forecasting a bleak future for pharmaceutical investment in the UK.

Sir John Bell, the former regius professor of medicine at Oxford and a revered figure in UK life sciences, bluntly stated on Radio 4 that chief executives of major pharmaceutical companies have uniformly expressed reluctance to invest further in the UK. This sentiment echoes across the sector. Key factors driving this chill include the UK’s comparatively low spending on medicines—9% of its healthcare budget versus much higher percentages in Germany, Italy, and France—and a punitive “clawback” mechanism that last year required pharmaceutical firms to return 23% of NHS prescription medicine revenues. Such aggressive cost recouping is widely viewed as discouraging investment, especially when European counterparts operate with far less onerous clawback rates.

The government justifies its tough stance as protecting NHS budgets and demanding value for money, while pharmaceutical firms argue that the UK’s approach threatens innovation and long-term industry growth. Compounding the issue is the Treasury’s tight budget constraints and an official “value for money” framework for new drugs that has not been updated since 2001. Additionally, a new dynamic introduced by US pharmaceutical policies complicates matters: US manufacturers, under pressure from the Biden administration to lower drug prices to European levels, are wary of the UK’s traditionally low pricing being used as a benchmark for US markets. Merck’s move is indicative of a broader trend where multinational companies reassess their global investment strategies in light of these cross-jurisdictional pricing pressures.

Merck’s abandonment of a half-built research facility is not an isolated incident. Earlier, AstraZeneca shelved plans for a £450 million vaccine plant, citing diminished government support. These setbacks are significant blows to the UK government’s ambition to position the country as a “life sciences superpower.” Although Merck will retain 1,600 jobs and continue clinical trials in the UK, the withdrawal of fresh investment and infrastructure development is a serious concern. The loss of potential new jobs and research capacity risks a slow erosion of the UK’s competitive edge in pharmaceutical innovation.

The government’s response has been mixed. While the Department for Science, Technology and Innovation maintained a cheerful stance on the attractiveness of the UK investment environment, health officials are now urging renewed talks with pharmaceutical companies to address concerns. Internal blame games have emerged, with the Department of Health attributing the problem to Treasury short-termism, while others accuse pharmaceutical firms of using investment decisions strategically to pressure for more favourable drug pricing.

The pharmaceutical industry, represented by the Association of the British Pharmaceutical Industry (ABPI), has been vocal about the damage caused by Britain’s drug pricing policies. ABPI data reveals that the UK’s ranking for foreign direct investment in pharmaceuticals has fallen from second place in 2017 to seventh in 2023. The voluntary branded medicines pricing, access and growth (VPAG) scheme, which imposes an effective sales tax through high clawback rates, has led companies to delay launching new medicines and reconsider their involvement with the NHS. The increasing financial burden from these policies contributes to concerns that the UK is becoming “uninvestable,” prompting companies to reduce headcount and withdraw partnerships.

All told, the situation epitomises a challenging balancing act for the UK government. On one hand, it must ensure affordable access to medicines for the NHS amidst financial constraints. On the other, it risks alienating the very companies that drive pharmaceutical innovation and economic growth. As Sir John Bell notes, the UK’s ambition to become a global life sciences hub cannot succeed without sustained and significant investment from large pharmaceutical companies. At present, pervasive doubts within industry circles suggest the UK’s life sciences sector is at a crossroads, and without strategic adjustments, the current trends may impair its future competitiveness and capacity for innovation.

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Source: Noah Wire Services

Noah Fact Check Pro

The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.

Freshness check

Score:
10

Notes:
The narrative is current, with the earliest known publication date being September 10, 2025, aligning with the article’s publication date. The report is based on recent events, including Merck’s decision to scrap its £1 billion research centre in London’s King’s Cross, announced on September 10, 2025. ([ft.com](https://www.ft.com/content/5ace49a8-47ab-409d-8909-6edb107ce71a?utm_source=openai))

Quotes check

Score:
10

Notes:
The direct quotes from Sir John Bell and other industry leaders are unique to this report, with no earlier matches found online. This suggests the content is original or exclusive.

Source reliability

Score:
10

Notes:
The narrative originates from The Guardian, a reputable UK news organisation known for its in-depth reporting and analysis. This enhances the credibility of the information presented.

Plausability check

Score:
10

Notes:
The claims made in the narrative are consistent with other reputable sources. For instance, Reuters reported on Merck’s decision to abandon its London research centre, citing challenges in the UK’s business environment. ([reuters.com](https://www.reuters.com/business/healthcare-pharmaceuticals/britain-defends-investment-record-merck-scraps-labs-over-pharma-environment-2025-09-11/?utm_source=openai)) Additionally, the Financial Times highlighted the UK’s declining competitiveness in the life sciences sector, corroborating the concerns raised in the narrative. ([ft.com](https://www.ft.com/content/53543a40-a2ee-49a5-b395-9572a02120a8?utm_source=openai))

Overall assessment

Verdict (FAIL, OPEN, PASS): PASS

Confidence (LOW, MEDIUM, HIGH): HIGH

Summary:
The narrative is current, original, and originates from a reputable source. The claims made are consistent with information from other reputable outlets, and the direct quotes are unique to this report, suggesting originality.