Glaxo invests £500m in UK and builds new factory

Drugmaker GlaxoSmithKline has said it will invest £500m in manufacturing in the UK and create up to 1,000 jobs.

It will build a new factory in Ulverston, Cumbria. Expected to open in 2020, it will be its first new facility in the UK for 40 years.

Glaxo said it was "one of the largest commitments to the UK life-sciences sector in recent years".

The firm said its decision was influenced by tax cuts confirmed in this week's Budget.

Glaxo said £100m of its investment would go to its Irvine and Montrose manufacturing sites in Scotland.
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Patent box

The so-called Patent Box is a reduced level of corporation tax on profits attributed to patents and similar types of intellectual property.

The chancellor confirmed in the Budget that it will come into effect from April 2013, introducing a lower rate of 10%. By contrast, the main rate of corporation tax rate will be 23% from that time.

Although being introduced by the coalition, the idea of a Patent Box was first proposed by the then Labour government in the 2009 Budget.

The aim of having a Patent Box is to encourage companies, such those in the pharmaceutical sector, to establish more facilities in the UK.

* Glaxo's major boost for Cumbria

The move is a boost to the UK pharmaceutical industry, which suffered a serious blow when US drugs giant Pfizer announced a year ago that it would close its research and development facility in Sandwich, Kent - with the loss of about 1,500 jobs.
'Transformed'

Glaxo made its announcement after Chancellor George Osborne confirmed in the Budget on Wednesday that the government would go-ahead with the introduction a so-called patent box.

These allow corporations to pay a lower rate of tax on profits generated from UK-owned intellectual property.

"The introduction of the patent box has transformed the way in which we view the UK as a location for new investments, ensuring that the medicines of the future will not only be discovered, but can also continue to be made here in Britain," said Glaxo chief executive Sir Andrew Witty.

"Consequently, we can confirm that we will build GSK's first new UK factory for almost 40 years."

Glaxo said last year that it would build a new facility at one of four potential sites in the UK if a patent box, first proposed by the Labour government in 2009, was brought in.

In an interview with BBC Radio 4's Today programme, Sir Andrew added that the government's continuing moves to cut general corporation tax was another major factor behind his company's decision.
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“Start Quote

If businesses and business leaders who benefit from tax cuts use some of the extra income they've retained to make new job-creating investments, as Glaxo has done, then the benefits of their tax saving will be more widely shared”

End Quote
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"What is pivotal for us is that we have been building factories for the last 40 years just not in Britain, but in other countries... due to their lower tax rates," he said.

"The combination of the patent box, combined with falling corporation tax has really changed the position [of the UK]."
Innovation boost

The new Ulverston plant will cost about £350m. Glaxo will start building in 2014-2015 and take at least six years to finish it.

The current factory at the site employs about 240 people and manufactures materials for antibiotics.

The drugmaker, which employs 15,000 people in the UK, said it could increase its investment in Ulverston to £700m, depending on "continued improvements in the environment for innovation in the UK".

The firm has recently launched a £50m UK venture capital fund focusing on investments in "early-stage healthcare companies and spin outs from academia in the UK".
'Changing Britain'

Chancellor George Osborne said the firm's decision indicated that the government's economic strategies were working.

"My responsibility as the country's chancellor is to get the economy moving, to get jobs created, and when big companies say that about Britain, people should sit up and notice that we are changing the British economy for the better."

However Labour said the government lacked "a compelling vision for British science and innovation".

"The UK has a real competitive advantage in the life sciences sector, so it's a shame that BIS have cut the budget for the Office for Life Sciences - also established in 2009 - and cut its staff by half," said Chi Onwurah, shadow science minister.