Many in the UK worry that a successful bid by Pfizer to aggressively acquire one its biggest pharmaceutical companies, Astra Zeneca, will result in large UK job losses in R&D and manufacturing. They seek to get the UK government to block this deal in order to protect British industry and jobs. What should the UK government do?
Astra Zeneca employed 51,600 people world-wide in 2013 but only 7,200 of these were in the UK. This is down from 59,800 employees word-wide in 2011 of which 8,700 were in the UK.
This significant loss of jobs is due to the fact Astra Zeneca has been relatively unsuccessful in recent years: global revenue was $33.6 billion in 2011, $27.9 billion in 2012 and $25.7 billion in 2013.
In order to create and retain jobs we must have successful businesses. We must also have a successful business to invest in new drug development. It is in patients’ long term interest to have a thriving pharmaceutical industry. To see how this works ask yourself how many successful medical technologies came out of the Soviet Union and communist Eastern Europe. Or China for that matter.
A certain amount of drug development is serendipity and Astra Zeneca have been unlucky with their recent research pipeline. Industry insiders would say that it is a better managed company than Pfizer. It’s just not as big.
But the real question is whether the newly merged company will be better than the two independent companies and whether they want to invest in UK manufacturing and research expertise.
Few Astra Zeneca jobs are in the UK so the fact that it is considered as a UK company (with a French CEO and a Swedish Chairman) does not necessarily help.
Astra Zeneca does not plan to have the bulk of its research efforts in Cambridge because of some misplaced patriotism. It plans to have its research in Cambridge to benefit from the life-sciences expertise in the Cambridge technology cluster, partly driven by science coming out of Cambridge University.
Pfizer will also dispassionately look at where is best to place its researchers in order to maximize the quality of drugs in its development pipeline. It will want to spread its research to a few technology clusters, to get a broader range of excellence and expertise, but only if those technology clusters are truly world class and cost effective. This is where the UK government can add the most value.
The UK owns very few car companies. However the UK is now making and exporting more cars than at any time in its history. The world’s motor racing research is almost entirely done in the UK, attracting the majority of the Formula 1 racing teams in a broad technology cluster based loosely around Oxfordshire. This employs, trains and retains exceptional British automotive engineering expertise and much of the profits are reinvested back in the UK. Much of this research and knowledge ultimately ends up in consumer cars, which encourages the world’s volume car manufacturers to maintain a presence here. The same can be true of other technologies such as biotechnology, nanotechnology and robotics. The government can implement policies to encourage the development of these technology clusters by investing in research, development and education.
The USA is much more aggressive in defending its businesses than the UK. I don’t always like the way the USA uses its colossal economic power, but the great thing about not being socialist is that we have the luxury of living in the real world. The real world states that the USA is the biggest and most lucrative market in the world. As such they can get away with much more than the UK. Companies will put up with a lot to have access to their market, and do. Companies will put up with a lot less from the UK government because the potential gains are so much smaller. Sad, but true. Consequently we must work harder to attract businesses to invest in the UK. In any case the idea of national ownership is ludicrous. Pfizer is seen as an American company (with a Scottish born CEO) but its shareholders are global. I own some Pfizer shares so at least a small percentage of its ownership is British.
The nominal ownership of a company is less important than whether it invests in UK technology and industry. Whether they do that depends on whether they see the UK as a good place to do business. A strong reputation for low taxes, low government interference and government investment in research, development and education will make far more difference in the long run than short-term protectionist political policies.