AstraZeneca, Whitehall, and a failed £450m deal for the next generation in vaccines. What went wrong? | Pharmaceuticals industry

At a tense meeting with senior civil servants on the afternoon of 29 January, the chair of AstraZeneca, Shaun Grady, pulled the plug on a planned £450m expansion of its childhood flu vaccine factory in Merseyside – bringing a year and a half of negotiations to an abrupt halt.

The decision, announced publicly two days later, came just hours after the chancellor, Rachel Reeves, had singled out Britain’s biggest drugmaker as one of the country’s “great companies” in her long-awaited speech on kickstarting UK growth.

If successful, the scheme would have transformed the site into a six-hectare research and manufacturing centre producing the next generation of vaccines – strengthening the UK’s pandemic readiness with the ability to make several at a time from start to finish.

In July last year, AstraZeneca’s chief executive, Pascal Soriot, had declared the project in the Liverpool suburb of Speke “absolutely ready to go”. So how did months of wrangling over a £90m state support offer made by the previous government collapse into recriminations?

It is not the UK’s first big investment loss in this sector. At the height of Covid, Britain’s second biggest pharma firm, GSK – a major vaccine maker whose biggest site is in Belgium – was keen to start producing jabs in the UK. “They were looking at where they were going to build their future manufacturing,” said Clive Dix, who chaired the UK’s Covid vaccine taskforce during the pandemic. “I helped broker, getting them talking to government, and there were some great ideas going forward, but [GSK] walked away in the end. They just said: ‘Too slow. It’s too difficult.’”

He said government departments “want you to fill so many forms in and go through so many hoops – it’s just not how business works, unfortunately”.

Some have questioned the way civil servants calculate value for the taxpayer from big corporate investments that are supported by government incentives. In AstraZeneca’s case, Dix put the blame squarely on the “machinery at Whitehall”, pointing to “penny-pinching” civil servants who “don’t understand the ecosystem”. He argues that “ministers can only go by the recommendation they’re given”.

Keith Neal, emeritus professor of epidemiology of infectious diseases at the University of Nottingham, said: “Vaccines are a massive growth industry. I know the drug companies play one country [against] another, but … this was a potential major benefit to ensuring the vaccine supply”.

AstraZeneca – the UK’s largest listed company, with a valuation of about £180bn – first began talking to ministers about the Speke expansion in July 2023 and it was announced in last year’s March budget by the then chancellor, Jeremy Hunt. The next day, he was pictured striding at the Speke factory where he described the investment as a “vote of confidence in the UK and an investment that helps to grow our economy”.

The government’s press release noted the decision was “contingent upon mutual agreement … and successful completion of regulatory processes”.

But after Labour won the election on 4 July, all spending was put on hold by Reeves. Then, given the precarious state of the public finances, the government decided to cut the Speke support package to £40m – less than half Hunt’s offer of £70m in grants and £20m in research and development (R&D) support.

As meetings between the company, the Treasury, the business department, the science department and the Office for Life Sciences – part of the health and science departments – continued over months, the timetable, from AstraZeneca’s point of view, slipped.

It had wanted to wrap up the deal by August to keep it on track with regard to other investments. The company is putting in $3.5bn (£2.8bn) in the US, and building a $1.5bn site to make next-generation cancer treatments in Singapore – where it has received “very substantial support”, Soriot said pointedly last week.

The cell-based technology to be introduced at Speke – which can make vaccines more effective and easier to produce than the current egg-based process – required clinical trials ahead of regulatory approval.

Shortly after Labour was elected, Grady told the business secretary, Jonathan Reynolds, that beginning in August was “an urgent issue … to meet our business case timelines”, according to a letter obtained by the Times.

The government upped its offer at the end of October, after Reeves announced a new £520m life sciences innovative manufacturing fund, and the Financial Times reported it was eventually revised to £78m. But AstraZeneca wanted the government to honour Hunt’s £90m proposal and Soriot said on Thursday the firm had been willing to increase its investment to £500m to seal the deal.

Speaking after AstraZeneca reported a 38% jump in annual profits to $8.7bn, he denied any rift with the government: “We could not make the business case work and we needed a certain level of support to make this economically viable. And that was not possible for the government to justify, which we totally understand. We were all very disappointed.”

AstraZeneca’s breast cancer drug Enhertu was rejected by the National Institute for Health and Care Excellence (Nice) for use in England and Wales for the third time in November on pricing grounds. The rejection came despite months of negotiations and the intervention of health secretary, Wes Streeting.

Soriot denied any link between the decisions on Enhertu and Speke. He said the UK’s recent move to increase in the amount it clawed back from sales of NHS drugs had discouraged investment, but said that had “nothing to do with Speke”.

A government spokesperson said: “All government funding must demonstrate value for the taxpayer and, due to a change in the terms originally agreed, we could not justify offering the same amount of funding.”

Chris Bryant, the science minister, told MPs last week that the support package had been cut because the drugmaker had reduced its proposed R&D spending at Speke from £150m to £90m, describing the cancelled investment as “deeply disappointing”. This left shadow business secretary Andrew Griffith to crow: “There’s no vaccine for incompetence.”

Dix said: “This was a slam dunk. They shouldn’t be quibbling over £10m or £20m; we’re talking about trying to build resilience for the UK … It’s what the UK needs. It needs manufacturing capability. Manufacturing capability for science has moved abroad.”

In Liverpool, the news was greeted with dismay and disbelief. The city’s regional combined authority was not part of the talks, but its mayor, Steve Rotheram, said he “continues to be in discussions with the government about the funding that had been earmarked for this project, and we are pushing to ensure that it remains in the city region, helping to fuel other transformational life ­sciences projects”.

Carl Cashman, the authority’s opposition leader, urged the mayor to “demand answers” from parliament. He said: “It’s devastating news for the growth of the sector and for jobs but I think a wider point is: why [are] billions of pounds pumped into the south on projects but they’re squabbling over small amounts for Liverpool and the north in comparison?”

The ditched investment may have ramifications for the city’s life science investment zone, where several disease projects are getting under way, said Janet Hemingway, former president of the Royal Society of Tropical Medicine and Hygiene, who set up an infection innovation consortium in the city in 2020. AstraZeneca’s current Speke site only does routine flu vaccine manufacturing. “By expanding the site to do more vaccine-related R&D, it would have made it easier to collaborate,” she said.

GSK’s chief executive, Emma Walmsley, also weighed into the debate, saying: “It is absolutely critical … that the UK government does step up and accelerate progress alongside industry, given the pace of change across the world and the fierce competition from other countries, which is only getting stronger.”

The 450 people working at the Speke site found out about the cancellation when the news leaked, forcing AstraZeneca to rush out its announcement. While the 31 January statement stressed the facility would continue to produce childhood flu nasal spray for the UK and US vaccination programmes, this was cold comfort to those who had banked on a boost to the city – and to Reeves in her push for investment in Britain.