AstraZeneca abandons plan for £450m vaccine plant in UK

In a shock move, AstraZeneca has ditched a plan to invest £450 million ($558 million) in a new vaccine manufacturing plant in the UK, after the government reduced the offer on the table to support the project.

The decision was confirmed by a spokesperson for AZ, who told the Financial Times that the investment at its Speke site in Liverpool was no longer being pursued due to "several factors […] including the timing and reduction of the final offer compared to the previous government's proposal."

It's a major blow to the Labour government's drive to push economic growth in the UK and a public relations disaster for Prime Minister Keir Starmer and Chancellor Rachel Reeves, who have been vocal about their determination to encourage capital investment projects.

Recent media supports suggested delays in putting the funding proposal together had caused AZ to miss its own internal deadlines for the construction.

Last year, it was rumoured that the company was considering changing the location of the facility to Philadelphia in the US or possibly to India, after Reeves reportedly pushed to reduce the package from around £90 million – based on £70 million in grants and £20 million in R&D support from the UK Health Security Agency (UKHSA) – to £40 million.

AZ dismissed that rumour shortly after it emerged, but it's clear now that there was friction behind the scenes.

The plan to build the plant was announced in March 2024 by Jeremy Hunt, who was Chancellor for the previous Conservative government, who called the decision a "vote of confidence" in the UK's life sciences sector.

Another £200 million was pledged by AZ to expand its already large presence in Cambridge – the site of its flagship Discovery Centre (DISC) R&D facility, which opened three years ago – with a new facility that could add 1,000 researchers to its then headcount of 2,300. The FT suggests that plan is unaffected by AZ's decision on the Speke investment.

AZ's decision comes against a backdrop of anger among pharma companies about the UK's system of paying rebates on sales of prescription drugs to the NHS, which according to the Association of the British Pharmaceutical Industry (ABPI) has resulted in the value of the UK branded medicines market declining by 11% in real terms in the last decade.

The introduction of a new voluntary scheme in late 2023 reduced what had been skyrocketing repayment rates, reaching upwards of 20% from the usual rate in the mid-single digits. However, the sector has been incensed by an announcement by the government in December to set the rate in 2025 to 22.9% - which the ABPI says will mean companies will have to repay around £3.4 billion.

Just last week, AZ revealed a $570 million investment in Canada, while last year the company said it would invest a whopping $3.5 billion to expand its R&D and manufacturing operations in the US by 2026.