US pharmaceutical company Merck has pulled the plug on a £1 billion ($1.4 billion) research centre in London, blaming the country's “lack of investment” in the sector and its drugs prices.
The company, known as MSD outside the US, said it would not go through with the construction, which had already started in the King's Cross district. Instead, it will relocate the research activity to existing sites, primarily in the US.
Pharmaceutical companies have been shoring up investments in the US amid the Trump administration's tariff threats and pressure to move more manufacturing to America.
Merck's move is the latest setback for Britain's domestic pharmaceutical industry. It follows UK sector rival AstraZeneca's decision to abandon plans to build a $540 million vaccine factory near Liverpool, because of what it said were insufficient state incentives.
Global pharmaceutical companies have railed against Britain's efforts to extract larger rebates from drugmakers. The proposal threatens to make the country “uninvestable”, an industry group said earlier this year.
Negotiations over the policy ended in a stalemate in August after drugmakers baulked at the government’s offer to increase spending on medicines and reduce the rebate.
Sir John Bell, former regius professor of medicine at Oxford University, said on Thursday that the decision was symptomatic of the mood of chief executives in the pharmaceutical industry, that “they are not going to do any more investing in the UK”.
He said the pharma industry was in “real trouble” in terms of pricing due to pressure from US President Donald Trump. He also said that while the UK had increased investment in the wider NHS, it had dramatically reduced the amount it is willing to pay for pharmaceuticals.
He cautioned that the drugs giants are vital to a thriving life science industry. “Without large companies it isn’t going to work. If they can’t sell their products here they will go somewhere else,” he told the BBC.
The spat is particularly tricky for Prime Minister Keir Starmer as he seeks to encourage investment to boost the country's productivity.
The British government acknowledged the “concerning news” and was standing by to help Merck employees in the UK and others affected by the development, a spokesman said.
The pharmaceutical company said it would no longer take possession of Belgrove House in King's Cross, ditching a project that would have engaged 800 workers over the next two years.
Merck signed a long-term lease on the London site in 2022, which is being developed by Precis Advisory Ltd. Extensive building work has been carried out by main contractor Mace, with a topping out celebration in July marking the placing of the building's final steel beam.
The development is opposite King’s Cross station, a central London commuter hub. Construction was meant to finalise in late 2027.
Merck said the decision stemmed from a company evaluation of its research capabilities “and reflects the challenges of the UK not making meaningful progress towards addressing the lack of investment in the life science industry and the overall undervaluation of innovative medicines and vaccines by successive UK governments”.
It said it would also close down its activities in two London laboratories by the end of 2025, leading to 125 job losses.
This year, Merck announced several major US investments, including a $1 billion site in Delaware to produce biologics and its blockbuster cancer drug Keytruda, which is expected to create more than 4,500 jobs.
Merck confirmed the news first reported by The Financial Times, which had quoted the company as saying: “Simply put, the UK is not internationally competitive.”
The British government spokesman said that “the UK has become the most attractive place to invest in the world, but we know there is more work to do”.
He said the government recognised that the decision would dismay Merck employees in the UK and it “stands ready to support those affected”.
Merck is in the process of cutting $3 billion from its annual spending, which the company said will reduce its real estate holdings around the world.
The company said it is increasing its overall investment in research with a particular focus on the US. After the cuts, Merck will continue to employ about 1,600 people across the UK, according to a spokesman.
