The contribution made by GlaxoSmithKline and AstraZeneca alone is worth considerably more annually to the UK economy than any other industry, according to a new study.
The report from the Office of Health Economics, which provides independent research, advisory and consultancy services on policy implications and financial issues within the pharmaceutical sector, shows that the additional net value of the BPG (British Pharma Group ie AstraZeneca and GSK) compared to other sectors is worth around £1 billion annually to the UK economy.
The study, authored by Martina Garau and Jon Sussex goes on to claim that “many companies and sectors in the economy earn substantial incomes for their employees, shareholders and lenders,” but do not generate ‘economic rent’ in any significant amounts. The economic rent concept is used to estimate the net loss to the economy if the BPG companies were, hypothetically, to leave these islands and even if the UK labour and capital they employ were to be rapidly absorbed into their next best alternative uses, eg another industry or service sector in the economy.
The OHE says that the R&D-based pharmaceutical industry “is exceptional in earning large amounts of economic rent for the UK” and the latter total of the two BPG companies is estimated to be around £400 million to £1.3 billion. In addition, because the two contribute positively to the UK’s trade balance, they help keep sterling strong and hence the cost of imports down.
The study concludes that if the BPG companies were to cease their activities here, this would weaken the balance of payments, making it harder for the UK to pay for its imports, and this trade effect represents a further £0.6 billion to £2.9 billion of net annual benefit to the UK economy from the presence of the BPG’s manufacturing activities.