AstraZeneca announced this week that it would be freezing investment in its UK operations until greater clarity was provided over the outcome of Brexit. The company, which is one of two pharma giants based in the UK, is a major contributor to the country’s healthcare sector, and so this announcement represents a major setback.

Although the investment freeze could be regarded as a sign of poor health in the short term for the UK pharmaceutical industry, the British government will be hoping to restore the faith of pharmaceutical companies once a deal has been reached with the EU over the UK’s exit.

The pharmaceutical industry is one of the largest and most dynamic industries in the UK, and was estimated to be worth £18.6bn ($26.9bn) in 2017. AstraZeneca is the second largest pharmaceutical company headquartered in the UK after GlaxoSmithKline, and reported global drug sales of over $22bn in 2017. As well as having corporate headquarters based in London, the company has a major R&D plant in Cambridge, England, as well as numerous manufacturing facilities across the country. Therefore, any long-term freeze in investment within the UK from AstraZeneca could result in significant harm to the UK pharmaceutical sector.

Importantly, AstraZeneca has indicated that the current freeze in investment would last only while there was uncertainty over the deal reached between the UK and EU, meaning this freeze in investment is likely to be short-term. Although it is unclear as to when Brexit uncertainty will end, some reports suggest that negotiators are nearing a deal, with issues surrounding the hard border between the UK and Ireland being the sole remaining point of contention before details are finalised. Once details of this deal are made public, it will resolve much of the uncertainty surrounding how pharmaceutical companies should expect to operate within the UK after Brexit.

Uncertainty continues for UK pharma

But even once a deal is reached, it will still need to be approved by the UK Parliament before the country leaves the EU. With the opposition Labour party and even some in the ruling Conservative party suggesting that they plan to vote against the deal, there is a chance that Brexit uncertainty may be set to continue for a while yet. That being said, unless there is an extension granted to the deadline for Britain leaving the EU, uncertainty is set to end by Brexit day on 31 March 2019.

In the long term, the impact of Brexit on the pharmaceutical industry is less clear. GlobalData’s research indicates that 88% of survey respondents in the pharmaceutical industry with company headquarters located in the UK do not anticipate relocation after Brexit, suggesting that the majority of pharma companies intend to continue operating out of the country.

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However, overall sentiment of the future health of the pharma industry was not positive, with only 37% of UK and 29% of EU workers surveyed within the pharmaceutical sector saying that they expected the UK to be an attractive destination for healthcare companies to conduct research and manufacturing post-Brexit. Overall, the consensus is that there will be some negative impact on the UK pharmaceutical industry after Brexit, but only time will tell how severe this impact will be.