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The U.K. has had a stronghold on the biopharma and healthcare industry for a long time and remains one of the top hubs for life science research. So, Merck’s decision to back out of its $1 billion expansion was unexpected, with many calling it a blow for the region. However, others believe that this has been a long time coming, as life science investments in the U.K. have been scarce and spending has declined.
Merck lays off 125 UK employees , scraps $1 billion project
The American pharma giant Merck, known as MSD in the rest of the world, announced plans to move its life sciences research from the U.K., slashing 125 jobs. This comes amid pressure for companies to set up and expand manufacture in the U.S. as part of U.S. President Donald Trump’s trade tariff policies.
The pharmaceutical, which previously revealed plans to lay off 6,000 people and cut $3 billion a year in costs, blamed the U.K. departure on Britain’s reluctance in investing in life sciences and the government’s lack of drug spending.
“[This] reflects the challenges of the U.K. 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 U.K. governments,” said MSD in a statement.
The decision affects a new lab in London called the UK Discovery Centre, which was being built and set to open in two years. It would have employed around 800 people, including 180 scientists, but now the entire program has been scrapped.
On top of that, the 125 job losses are part of Merck’s plan to vacate its labs in the London Bioscience Innovation Centre and the Francis Crick Institute – both key life science incubators, with the former hosting more than 60 companies – by the end of 2025.
Markus Gershater, chief executive officer (CEO) and co-founder of digital platform Synthace, thinks that while the news is disappointing, it’s not uncommon for big pharma companies to pull out of major deals like this.
“It’s important to view this within their global $3 billion cost-cutting initiative through 2027. For multinational pharmaceutical companies, it’s operationally easier to eliminate planned investments than to restructure established facilities,” said Gershater.
Sanofi and AstraZeneca suspend U.K. funding
However, it does signal that the U.K. has a hard time attracting research and development (R&D), let alone having it stick around. Gershater acknowledges that the U.K. has “historically excelled” at early-stage innovation but has struggled with commercialization and sustaining R&D operations long-term.
“This isn’t new, but current market pressures are amplifying these gaps. We’re seeing this pattern across multiple players,” said Gershater.
Indeed, Merck isn’t the only one to bail on Britain. Sanofi paused its investments in the U.K., calling it an unfriendly place to do business and boost innovation. Sanofi’s investments in the U.K. are around £35 million ($47.15 million), a drop in the ocean compared to the £6.7 billion ($9.03 billion) it spends globally. In recent years, it has halved clinical trials held in the region even though its pipeline continues to grow. It also shut down labs in the biotech hotspot of Cambridge, U.K., displacing 90 employees.
Cambridge (U.K.)-headquartered AstraZeneca was another big pharma player that halted its spending in the country. It suspended a project that cost £200 million ($271 million) last month, worrying people about a potential exit from the U.K. However, the company quashed these fears two days ago, despite reports suggesting that the company was ditching the U.K. for better prospects in the U.S., as it switched to a direct listing of shares in the U.S.
Meanwhile, Lilly warned that it may cancel its Gateway Labs project in Britain, which is meant to house labs, offices, and workstations, and already exists in the U.S. and China.
Life science investments decline in the UK: biopharmas blame clawback rates and clinical trial bottlenecks
While all these plans were announced last month, there has been a gradual decline in investment in the U.K. They’ve all cited similar reasons, the most prominent one being that Britain’s life science and healthcare environment has a funding problem. Whether these multinationals are plotting exit strategies is uncertain, but it does indicate that these companies straying away from the region might be part of a bigger problem.
While the U.K. has long been a hub for life sciences innovation, according to Rajiv Jalan, founder and chief medical officer (CMO) of London-based liver disease therapeutics company Yaqrit, several systemic challenges are making it harder for pharma and biotech companies to attract sustained investment.
Jalan pointed out that a high clawback rate was a major factor, a sentiment shared by several drugmakers. This year’s rate was unexpected, as the levy was 22.9% of U.K. sales that must be returned to the government this year, far more than the 15% that was predicted. Repayments to the U.K. National Health Service (NHS) can go up to 31.3%, Jalan explained, which is significantly higher than in countries like Germany or France.
“This creates a difficult commercial environment, especially for companies trying to scale,” said Jalan.
NHS England cited higher costs for curative cell and gene therapies, and medicines for conditions including cancer, diabetes, and eye diseases, as their reason to hike up the tax rate.
Jalan added that NHS spending has also “declined sharply,” from 15% of the budget a decade ago to just 9% today, “limiting the system’s capacity to adopt new therapies.”
Meanwhile, initial public offerings (IPOs) have stagnated, which is a blow as IPOs are a significant way for life science companies to scale up their innovations. In the U.K., there were no biopharma IPOs in the first quarter of 2025, marking the 11th consecutive quarter without a biotech listing on a public exchange. This is in contrast to the U.S., which saw a number of IPOs, despite a slowdown.
As for follow-on financing – capital raised through rounds of funding – the environment has been pretty volatile. This makes it “harder for companies to plan long-term growth,” said Jalan. Although, Jalan’s company Yaqrit has found funding success in the U.K. It was awarded £2.2 million ($2.97 million) grant from the National Institute for Health and Care Research (NIHR).
Clinical trial bottlenecks are also putting Britain at a disadvantage, according to Jalan. Echoing these thoughts, Alan Griffith, head of CDMO Global Operations at American multinational gene delivery company VectorBuilder, explained that clinical trial openings have plummeted.
Despite regulations tuned to improving patient access in clinical trials, encouraged by a revised Innovative Licensing and Access Pathway (ILAP) this year, a report by Clinical Trials Arena explained that there aren’t enough NHS workers to conduct drug trials, particularly in cancer. More databases, staff, and innovation are needed to unlock the U.K.’s cancer trial potential, the report highlighted.
“The U.K. has lost ground to China in year-over-year clinical trial activations, which has implications for both patient access and investor confidence,” said Griffith.
China and the U.S. deemed better for life science funding than UK
In fact, China has become an investment hub for many biotechs and pharmas, which has a substantially larger biopharma industry than the U.K.
“The U.K. offers incredible scientific talent and clinical infrastructure, but when it comes to scaling medtech ventures, other regions tend to offer more aggressive funding pathways and faster adoption cycles,” said Robert Learney, founder of diagnostics and medtech company Accunea. Learney’s U.K.-based company has snagged investments from the European Union (EU) – a €200,000 (≈$234,522) EU grant – and China.
“China has shown remarkable openness to medtech innovation. We’ve been impressed by the level of engagement; from investors to local officials and even the British Chambers of Commerce in China,” he said.
Early-stages to commercialization: what kind of innovation is encouraged in the U.K.?
All this is not to say that the U.K. doesn’t have innovation; quite the opposite, and according to Giffith, the different entities like biotechs, universities, and the NHS keep the innovation evolving.
“The U.K. has remained a top-tier destination for life sciences investment. Its enduring strengths, including world-class universities, the NHS as a national research partner, and innovation hubs like the Golden Triangle comprising London, Oxford, and Cambridge, create a fertile environment for early- and mid-stage biotech development,” said Giffith.
However, post early- and mid-stage development, securing funding for commercialization becomes tricky.
“The UK’s commercialization struggle stems from a critical shortage of risk-tolerant capital rather than solely government policy failures,” said Gershater. “This disconnect between innovation excellence and commercialisation success creates a self-perpetuating cycle where promising UK startups are forced to seek overseas funding or relocate entirely to access adequate capital. The problem transcends therapeutic development; even non-clinical life science technologies face similar barriers as they attempt to scale from proof-of-concept to viable commercial entities.”
Moreover, Gershater is not convinced that even early-stage projects are encouraged by U.K. investors. Unlike in Britain, U.S. investors are more willing to back earlier-stage, higher-risk ventures with substantially larger funding rounds. He pointed out that this creates a disparity in supporting “the lengthy, expensive journey from laboratory breakthrough to market-ready product.”
“This funding gap is particularly acute for life science technologies that may be years away from clinical application, where U.K. companies struggle to secure the patient capital needed to navigate technical development, regulatory pathways, and the inevitable setbacks inherent in innovation, challenges that American counterparts face with far more robust financial backing,” said Gershater.
The result of it is a persistent ‘valley of death.’
Gershater said: “[It’s] where groundbreaking discoveries languish without sufficient funding to bridge the gap between academic validation and commercial viability, ultimately forcing many promising companies to pursue growth opportunities abroad despite their British origins.”
Learney’s Accunea, like many startups, encountered challenges between early-stage validation and commercial traction.
“Despite having compelling pig model data and first-in-human results, we’ve occasionally been told we are ‘too early,” said Learney.
To add to that, he believes that the momentum around artificial intelligence in drug discovery is overshadowing medtech and other areas in life sciences on a global scale.
U.K. government to spend £86 billion on life sciences: will this be enough to revive the sector?
However, efforts are being made to make Britain not only a more investment-friendly place but also more attractive in terms of conducting research. The government has committed £86 billion ($115.9 billion) to fuel R&D in science and technology, it revealed in June.
Moreover, initiatives like the Cambridge Innovation Capital fund government-backed venture schemes strive to address the funding gaps. The former, which was set up over a decade ago, has invested around £250 million ($337.06 million) in life science programs. Meanwhile, advocacy organizations such as the BioIndustry Association (BIA) play a “key role in shaping policy and fostering dialogue between industry and government,” stated Griffith.
And as equity financing in the U.K. has been rising since 2023, “acquisition activity remains a bright spot,” according to Griffith. This is propped up by Merck’s £7.8 billion ($10.52 billion) acquisition of London-based Verona Pharma in June.
Merck’s back-pedaling on its $1 billion expansion seems contradictory to its acquisition of Verona Pharma. Maybe the big pharma will come around to investing in the U.K. in the future, but for now, its abandoned plan will stay put, as the U.K. has a lot of work to do in capturing funding to encourage innovation and bring treatments to people.
