Why Britain failed to close £450m AstraZeneca deal

AstraZeneca's decision to cancel a planned expansion of its vaccine factory near Liverpool has left Chancellor Rachel Reeves feeling less than chipper herself.

"Recriminations flew" after the pharmaceutical giant pulled the plug on the project, said the Financial Times, but "how did it all go so wrong"?

What was the deal for?

In November 2023, AstraZeneca proposed a major expansion of its vaccine plant in Speke, a move that would "bolster" Britain's claim to be a leading centre for life sciences.

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Soon afterwards, the company laid out the details of its request for support from the then Tory government: it wanted £100 million in grants to help develop the site.

What went wrong?

Things started to go awry when news of the proposed deal leaked, causing "deep frustration" for chief executive Pascal Soriot. But "the matter was smoothed over" and the chancellor at the time, Jeremy Hunt, got a final government offer of £90 million "over the line".

The relationship "frayed" again when the AstraZeneca board became "angered" by the government's "aggressive negotiations" on drug pricing.

Hunt announced the proposed deal but then Rishi Sunak called a general election and the government "entered campaign mode", leaving the deal and a pending AstraZeneca grant application "hanging in limbo".

After the election, the new Labour government claimed there had been no due diligence done on the deal and it offered a revised subsidy of just £40 million, prompting a "hissy fit" at AstraZeneca. Later, the Treasury put £78 million "on the table".

Within months, the company announced it was scrapping the plan. It told the FT this was partly because of "the timing and reduction of the final offer compared to the previous government's proposal".

The announcement was particularly embarrassing for Reeves because it came just hours after she'd named AstraZeneca as one of Britain's "great companies" in a speech about growth.

What does this all mean?

The company’s decision to abandon the Speke project was "seen as a heavy blow to the government", said The Telegraph. In "substance and timing", AstraZeneca's decision is "a blow to the government's recent zeal for growth", said Sky News.

It's the "second multinational to blame the new government for a withdrawal of investment". In November, Vauxhall owner Stellantis said it would close its Luton van plant, blaming net zero targets.

Mike Storey, a Liberal Democrat peer and former leader of Liverpool City Council, told the BBC it was "absolutely shocking" that the deal had collapsed at a time when "billions" were being spent on the life sciences sector in the Southeast.

Andrew Griffith, the shadow business secretary, said that "in the same week" the government talked about growth, it had apparently "fumbled" a deal with "one of the UK's largest companies".