Blow for Reeves as AstraZeneca ditches £450m investment

AstraZeneca has canceled its plans to invest £450 million in expanding its vaccine manufacturing plant in Merseyside, citing reduced government support. The pharmaceutical giant announced this decision just two days after Shadow Chancellor Rachel Reeves outlined Labour's plans to promote economic growth "faster and further."

AstraZeneca stated that a number of factors influenced the move, including "lengthy" negotiations and "the timing and reduction of the final offer compared to the previous government's proposal." The Treasury said that the originally proposed "investment structure" had changed, leading to reduced government funding. A Treasury spokesperson said, "All government funding must represent value for taxpayers, and unfortunately, despite significant work by government officials, a solution could not be found."

Despite abandoning the investment plan, AstraZeneca stated that its Speke plant will "continue to manufacture and supply flu vaccines for patients in the UK and around the world." The company added that no current jobs at the plant will be affected. On Wednesday, Reeves had listed AstraZeneca as one of the "great companies" and outlined her plans to kickstart economic growth, saying she was "determined to make Britain the best place in the world to invest."

But Shadow Business Secretary Andrew Griffith said: "Incompetence is incurable. In the same week they talk about growth, Labour appear to have botched a deal with AstraZeneca, one of Britain’s biggest companies and central to the key life sciences sector.” Labour has made boosting the UK economy a major goal to improve living standards, but economic growth remains slow.

The government has been trying to encourage more companies to invest in the UK and create new jobs. Previously, former Conservative Chancellor Jeremy Hunt had proposed the expansion of AstraZeneca's Speke plant in his March budget last year. But reports then emerged that the new Labour government's negotiations with the company over the plans had stalled. Hunt called AstraZeneca's announcement an "absolute tragedy" and urged Reeves to "call" the company's chief executive, Sir Pascal Soriot. He wrote on X: "If she believes in growth, short-term penny-pinching can’t be the answer."

AstraZeneca's decision was announced as some businesses prepare to face tax increases in April, with the rate of National Insurance contributions that employers must pay set to rise. The threshold at which companies start paying National Insurance will also be lowered. This comes after the Chancellor recently changed her rhetoric about the UK's growth and investment prospects after she and Prime Minister Sir Keir Starmer were accused of being negative about the national finances. But some companies have warned that the extra costs they face, along with increases in the minimum wage and reductions in business tax relief, could affect their ability to hire workers and invest in growth.