This has not been a good week for the UK government and its plans for economic growth.
US drugmaker Merck has scrapped a £1bn London research centre and will lay off more than 100 scientific staff, as the industry accuses ministers of making the UK uncompetitive and paying too little for medicines. ( Financial Times)
This hits home in two main areas of which the first is that pharmaceuticals have been a UK strength and are supposed to be a government priority.
Ministers are seeking to boost economic growth and attract investment, with life sciences named as one of eight “growth-driving” sectors in their flagship industrial strategy this summer. ( FT)
Can you name the eight? More to the point I bet if you asked ministers they would have forgotten them. Next up is the issue of the UK being uncompetitive and its reminder of the rise in employer’s National Insurance.
“Simply put, the UK is not internationally competitive,” the company said.
For balance this has added to what looks like a problem from the preious government.
Foreign direct investment in UK life sciences fell about 58 per cent to £795mn between 2017 and 2023, according to ABPI research.
If we switch to the relevant government department its message is along the lines of 2 ounces of chocolate being more than four.
The Department for Science, Innovation and Technology said the UK had “become the most attractive place to invest in the world, but we know there is more work to do” and that it was “taking decisive action to further unlock innovation”.
So attractive in fact that this latest news adds to this.
The withdrawal by MSD comes months after Anglo-Swedish drugmaker AstraZeneca ditched a £450mn expansion plan for a vaccine plant in Speke, northern England.
Ineos
Earlier this week The Times reported this.
Sir Jim Ratcliffe’s energy empire has stopped investing in Britain because the country has become “one of the most unstable fiscal regimes in the world”.
The boss of Ineos’s energy operations said the group would focus on its business in the United States after closing down its Grangemouth oil refinery in Scotland.
Brian Gilvary, executive chairman of Ineos Energy, told The Telegraph that the company would divert £3 billion of investment to the US.
This hits hard at what are two weak areas for the UK government. The first is the claim from UK Chancellor Rachel Reeves that she has “fixed Britain’s finances”. That was always an open flank after her extra borrowing contributed to higher debt costs. Also the issue of the UK’s high electricity prices are in the frame and they will not have been helped by one of the earliest announcements by the Chancellor.
Today the government is announcing that the rate of the Energy Profits Levy will increase to 38% from 1 November 2024, bringing the headline rate of tax on upstream oil and gas activities to 78%.
The period that the levy applies is also being extended to 31 March 2030, which is the end of the financial year in which the current Parliament is due to finish.
We only have to look across the North Sea to one of our closest allies to see a completely different approach.
All this should be good news for the likes of Equinor, Aker BP and Shell, some of the most active companies on the Norwegian continental shelf. They are still both exploring and investing heavily in existing fields in the North and Norwegian Seas. ( FT)
In fact I believe there was a new discovery only last month. Instead the UK weakens its trade and GDP numbers via this.
34 – Gas £12.3 billion 46.3% an increase of 39.1%
33O – Crude oil £9.2 billion 34.6% a decrease of 10.2%
35 – Electricity £832.0 million 3.1% an increase of 21.1%
33R – Refined oil £741.1 million 2.8% an increase of 4.9%
Those are our four largest imports from Norway according to the UK government in the year to the first quarter of 2025. Gas alone is enough to put us in a trade deficit and that is before the madness of letting them produce oil and gas so we can claim to be green.Plus if we look at the third category there is anther issue which may create trouble ahead.
Reservoir levels in southern Norway are now well below the 20-year average and heading towards 20-year lows. This is hugely concerning. Norway has almost no pumping capability which means that once the water has been used, it will not be replaced until it rains or the snow melts.
The south of Norway is the main region of tension. This is where the interconnectors to Britain and Germany land, and where the population is highest.
For those unaware the UK electricity supply has become reliant on the 1.4GW from the Norway connector such that it is almost permanently at that level.Even for example most of the last 24 hours when UK wind power has been circa 17GW. It was not supposed to be like that for the “Saudi Arabia of Wind” but it is. So we face the possibility that Norway might not be able to help us even if it wants to.That means that as well as the high electricity prices UK businesses will be looking at a system where rationing is increasing in possibility.
I have checked the weather in Norway and it looks like there is rain today and we should hope that continues.
The “powerful Budget board”
The Financial Times grandly announced this yesterday.
Sir Keir Starmer has tightened his grip on economic policy with the creation of a powerful “Budget board” linking top ministers and officials from Number 10 and the Treasury, with a remit to boost growth and avoid another bust-up with business.
Unfortunately for the rhetoric the members are a disappointment.
Shafik, a former Bank of England deputy governor, will be a key figure on the panel, as will Darren Jones, a former Treasury minister who has assumed the new role of “chief secretary” to the prime minister.
I looked at her situation in detail on November 1st 2019 but will simply for now point out even the Financial Times struggled to be complimentary about her competence.
With today’s perfectly reasonable BBC speculation that Minouche Shafik is a front runner for @bankofengland
governor, I am reminded how difficult it was to extract a clear view from her in an interview when deputy governor.
Perhaps the latter part is why she was made a Baroness. As for Darren Jones I can find no evidence that he has any expertise or experience in business at all. Also there seems to be rather an emphasis on spinning and PR.
Other members of the Budget team include Morgan McSweeney and Katie Martin — chiefs of staff to Starmer and Reeves respectively — in an attempt to improve the handling of the politics around the Budget.
Remember this is a government that came into power claiming it had a plan for economic growth which has morphed into this.
Starmer, who convened a cabinet devoted to growth on Tuesday, told ministers they must reassure business over the coming weeks that they have a strategy to boost national output, with a focus on issues including planning and new infrastructure projects such as a new rail line linking northern cities.
Comment
This has proven to be a difficult area for the present government. This adds to the issues of the previous one which had its own problems in this area. But the combination of its tax rises especially the employer’s National Insurance increase and the energy problems leave it on a sticky wicket. It has not all been bad news as the export orders and prospects for UK warships show. But the reality was that these were in train before this administration so whilst it has a tactical gain it is not a strategic one.
The best response to the “Budget Board” I think is this from Ofcastle.
Who – who is actually in business – will be on this board?
