Pharma and aerospace seek Brexit assurances after Nissan deal

October 31, 2016 11:59 AM EDT

The logo of AstraZeneca is seen on a medication package in a pharmacy in London, Britain, April 28, 2014. REUTERS/Stefan Wermuth/File Photo


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By Ben Hirschler and Sarah Young

LONDON (Reuters) - Britain's pharmaceutical and aerospace industries, both big exporters, are stepping up pressure on the government for assurances about their future after last week's post-Brexit deal with carmaker Nissan <7201.T>.

The two sectors, which have been talking to ministers since the summer, are pressing their case after written assurances by business secretary Greg Clark persuaded Nissan to invest in the country's biggest car plant, industry officials said.

Pharma and aerospace companies share the motor industry's worries about trade barriers once Britain leaves the European Union, but they also have deep concerns about regulation, their ability to recruit foreign staff and loss of EU science funding.

The discussions are part of a broader jockeying for position among businesses worried by the fall-out of Brexit, with finance companies anxious to retain so-called passporting, allowing London-based banks to sell services across Europe.

The pharma and biotech industry will detail its priorities on Nov. 23 when ministers next meet a life sciences steering group co-chaired by GlaxoSmithKline (NYSE: GSK) Chief Executive Andrew Witty and AstraZeneca (NYSE: AZN) CEO Pascal Soriot.

Nissan announced it would build two new models at its plant in the northeastern English city of Sunderland as a result of the agreement. Clark said on Sunday that the government aimed to negotiate tariff-free trade for the motor industry with the remaining 27 EU member states.

Steve Bates, CEO of Britain's BioIndustry Association, said the deal showed the government was "listening to business", adding that drugmakers' needs were somewhat different, with a big focus on the right climate for research and development.

"For pharma and biotech, we are looking for fundamental platforms to drive our sector over a long time," he told Reuters. "It's not as obvious as one car plant in Sunderland."

Autos, pharma and aerospace are three notable success stories for British manufacturing following the demise of traditional heavy industries such as steel and shipbuilding. As such, pharma and aerospace want parity of treatment.

"The prime minister has reportedly given assurances to car manufacturers that that sector will not be negatively impacted," Paul Kahn, president of Airbus Group UK (NYSE: AIR) told an industry conference last week. "We need to work together to ensure that as aerospace, defense and space sectors our voice is equally heard."

Airbus, which makes aircraft wings in Britain, is a major exporter along with aero engine maker Rolls-Royce (NYSE: RR) and defense group BAE Systems .

In the case of Nissan, CEO Carlos Ghosn had brought matters to a head by saying he would need a guarantee of compensation to offset any impact of Brexit before deciding whether to build the new models in Britain. Clark said no money had been promised to compensate for any imposition of tariffs.

TRACK RECORD

Other players may lack comparable binary investment decisions, but they want their track record to be recognized.

AstraZeneca, for example, is building a $500 million headquarters and research center in Cambridge, while GSK committed $360 million to investment in British manufacturing in July, five weeks after Britons voted to leave the EU.

A worry for both drugmakers and aerospace companies is the risk that Brexit will mean Britain also leaves regulatory bodies that allow companies to sell products across Europe and beyond.

Both the European Medicines Agency (EMA) and the European Aviation Safety Agency (EASA) offer one-stop-shops for endorsing product quality, which smoothes the sale of goods across borders.

Drugmakers warn that loss of access to the EMA could put British patients at the back of the queue for approval of new medicines, since applications for a British license would come after the European one, given the relatively small size of the UK market.

The EASA, meanwhile, is vital for aerospace firms since once the agency certifies a component it means many other global bodies, including U.S. regulators, accept that certification.

Another big area of concern where pharma and aerospace companies want assurance is the looming gap in funding currently provided by the EU for scientific research and development.

"Aerospace does quite well financially from that," Paul Everitt, CEO of industry group ADS, representing Britain’s aerospace, defense, security and space sectors, told BBC radio.

"But more importantly the collaboration with universities both here in the UK and in other parts of Europe, and part of our integrated supply chain around the rest of Europe, helps us be more competitive."

For global aerospace and pharma companies, Britain is a small market and any post-Brexit economic strains could further diminish its appeal, as highlighted by recent rows over drug pricing.

With growing strains on the National Health Service (NHS), some drugmakers are warning that Britain could lose its draw as a place for investment if the system does not pay up for new breakthrough medicines.

"Companies will not come to the UK to invest in R&D, experimental medicine or clinical trials if the healthcare system is not adopting the most important innovations that are becoming standard of care in other countries across the world," Mene Pangalos, head of AstraZeneca's innovative medicines and early development unit, told a meeting in parliament last week.

(editing by David Stamp)



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