Government’s current stance with regards to the potential Pfizer takeover of AstraZeneca sends mixed messages about UK recovery.
Chairman & CEO Ian Read
David Cameron’s stance with regards to Pfizer’s potential takeover of AstraZeneca is somewhat peculiar. Research & Development especially in the Science industry signals innovation, persistence and longevity. Therefore the employment associated to the Science industry appears to be the kind that the UK economy desperately requires in order to aid the fragile recovery. The anomaly comes as a surprise because both the Prime Minister and the Chancellor favour a takeover bid from US firm Pfizer, albeit with “more assurances” from Pfizer. The government are of course powerless to stop the takeover and Pfizer have no obligation to pander to Westminster’s requests, still, supporting a takeover bid that is most likely to remove highly skilled jobs away from the UK is not exactly a favourable position to adopt. More potently, the wrong message about the UK labor market is being sent.
Pfizer Chairman Ian Read will have fully comprehended the saving potential by transferring 20% of AstraZeneca’s R&D department to a more cost-effective location. Pfizer shareholders will support the move away from the UK as dividends will rise due to the vast savings, an estimated £595million will be saved if the Pfizer manage to forsake the UK for a more cost effective location. Savings on such levels will provoke a reaction from shareholders who will always look to maximise their dividends. It is their right to exercise that privilege and governments are powerless to stop such an action. It should be noted however that governments have a debt to its citizens to ensure that everything is done to at least show firms why the UK is an attractive place to conduct business. To stay silent would be questionable; supporting the bid that possibly ends some 6,700 jobs in such a specialist and labour-rich sector such a Pharmaceuticals is a surprise. When one considers the economic rhetoric propagated by the governments has been focused on full employment, safeguarding highly skilled jobs should subsequently be high on the list of priorities for the government.
Shadow Business Secretary Chuka Umunna said the assurances Pfizer had given ministers were “not worth the paper they are written on,” as it had declined to rule out breaking up AstraZeneca in the future.
“The government could act immediately to work to put in place a stronger public interest test encompassing cases with an impact on strategic elements of our science base and seek a proper, independent assessment of the potential takeover as Labour has called for. Instead, ministers have sat on their hands.”
Although it is the job of the opposition to opine an alternative perspective to that of the government, Chuka Umunna’s point does reflect the public interest and the Society of Biology, Biochemical Society, British Pharmacological Society and Royal Society of Chemistry all reflect his views. Nobel Prize winning Professor Andre Geim “fears” for the future of R&D in the UK. They all concur that recent mergers have led to firms seeking economies of scale, simultaneously translating to laboratory closures and job losses. This makes it even more astonishing that the government would encourage this particular takeover.
Hitherto both the Prime Minister and the Chancellor have maintained their faith in British business, especially in creating long-term employment opportunities. Just last month the Chancellor pledged to “fight” for full employment and of course he was referring to employment on a much larger scale. In the case of Pfizer, some 6,700 jobs could be lost. This case is more poignantly about what kind of message the public receives. Economies need something that is not tangible to fully recover and that is confidence. This contradiction does make the government look somewhat inconsistent. Had the government distanced itself or highlighted some of the features that make the UK an ideal place to conduct business, features such as the lowest corporation tax in the EU or Universities with rich heritage and so on it could at least tie in with the other messages they are sending about the recovery. Its current stance however leaves them looking somewhat flustered.
