Rachel Reeves was accused of scoring a “massive own goal,” after AstraZeneca scrapped plans for a £450m expansion of its vaccine manufacturing plant in Merseyside, blaming a cut in the funding on offer from the government.
Only two days after the chancellor highlighted life sciences as a key UK strength in a speech setting out her growth policies, the company said it had decided to scrap the high-profile project in the Liverpool suburb.
The former chancellor Jeremy Hunt, who announced the initial deal with AstraZeneca as part of his final budget in March last year, attacked the government’s decision to cut the taxpayer support on offer to the drugmaker.
“It is a massive own goal and totally contradicts the chancellor’s growth speech. How can she possibly implement a growth strategy if penny pinching once again wins the day?” he said.
A spokesperson for AstraZeneca said: “Following discussions with the current government, we are no longer pursuing our planned investment at Speke.
“Several factors have influenced this decision including the timing and reduction of the final offer compared to the previous government’s proposal.”
The AstraZeneca chief executive, Pascal Soriot – the highest-paid boss in the FTSE 100, with a pay package of £18.7m – had previously suggested the investment was “absolutely ready to go”.
The pharmaceutical company stressed that the existing facility at Speke, which employs 450 people, would continue to manufacture its nasal flu vaccine.
However, the expansion of the facility has been under threat since the Labour government decided to review taxpayer funding for investment projects, seeking to get better value for money, given what Reeves has claimed was a £22bn “black hole” in the public finances.
A government spokesperson said “a change in the makeup of the investment originally proposed by AstraZeneca” was behind the decision to offer a reduced government grant.
The spokesperson added: “All government grant funding has to demonstrate value for the taxpayer and unfortunately, despite extensive work from government officials, it has not been possible to achieve a solution.”
The company said the level of investment it was planning to make had not decreased.
In her growth speech in Oxfordshire on Wednesday, the chancellor said that as part of the government’s industrial strategy, it had already “provided funding to unlock investment in sectors like aerospace, automotives and life sciences”.
It is understood she recently increased the amount of support available to AstraZeneca from an initial gambit of around £40m.
But the offer remained significantly below what Hunt had put on the table, which sources suggest amounted to up to £90m, including a direct grant as well as support from the UK Health Security Agency.
The original announcement of the investment last year said the expanded facility would research and manufacture vaccines, and play a role in improving the UK’s pandemic preparedness.
As well as wrangling over the scale of funding on offer, AstraZeneca, which has recently announced new investments in the US, Canada and Singapore, was also frustrated at the amount of time the UK government took to reach a decision.
The announcement will be a blow to ministers’ hopes of continuing to attract high-profile investment projects, and underlines the difficulties of reconciling its push to woo business with Reeves’s determination to balance the books.
Reeves and the business secretary, Jonathan Reynolds, were at the World Economic Forum in Davos last week trumpeting the government’s pro-business approach, including moves to sweep away planning rules, and force regulators to be more growth-friendly.
But business lobby groups have contrasted this rhetoric with the £25bn increase in employer national insurance contributions announced in Reeves’s October budget, which they say will place a heavy burden on companies and hit jobs.
A survey from the Institute of Directors (IoD) suggests business confidence ticked up modestly in January, but hiring and investment intentions declined.
The IoD chief economist, Anna Leach, said: “The recent shift in the government’s rhetoric to emphasise growth is very welcome. The focus on unblocking planning constraints and the delivery of major infrastructure investments that will enhance transport capacity and drive innovation are the right ones.
“But it is clear that companies continue to be challenged by the breadth and scale of cost increases announced at the budget, and this risks undermining both the investment needed to drive growth and the sustainability of the public finances.”
