The drugmaker, which is Britain’s most valuable listed company, said it was no longer going ahead with the investment at the site near Speke, Liverpool, after failing to secure the necessary financial support from the Government.
AstraZeneca has been locked in a stand-off with the Government for months over state aid for the project, which would have involved a new factory powered by renewables built at the site. It had reportedly been offered around £90m by Rishi Sunak’s government, but Labour had sought to cut that state aid to £40m.
The announcement drew immediate criticism from the Tories, who said there was “no vaccine for incompetence” and branded the decision an “absolute tragedy”.
It will be regarded as an embarrassment for the Chancellor, who named AstraZeneca as a key investor in Britain two days ago in a major speech promising to “kick start growth” in the economy.
An AstraZeneca spokesman said: “Following protracted discussions with the Government, we are no longer pursuing our planned investment at Speke.
“Several factors have influenced this decision including the timing and reduction of the final offer compared to the previous government’s proposal. The site will continue to produce and supply our flu vaccine, for patients in the UK and around the world”
The decision is a blow to the Chancellor, whose speech on Wednesday was aimed at revitalising the economy and attracting investment to the UK.
Speaking at a Siemens factory in Oxfordshire, she said: “We are at the forefront of some of the most exciting developments in the world like artificial intelligence and life sciences, with great companies like DeepMind, AstraZeneca, Rolls Royce and of course Siemens delivering jobs and investment across Britain.
“We have already provided funding to unlock investment in sectors like aerospace, automotives and life sciences and we have set out reforms to boost financial services, the AI sector and creative industries.”
Ms Reeves said the economy “has suffered due to chronic underinvestment” and that she will solve this by “recognising that first and foremost it is businesses, investors and entrepreneurs who drive economic growth a government that systematically removes the barriers that they face”.
In its election manifesto, Labour listed life sciences as one of the industries it had worked with to plan future growth policies, and promised that “in government, we will set out plans for these and other vital sectors of the economy”.
Investors have been increasingly downbeat on the UK’s economic prospects since the Chancellor’s tax-raising Budget, despite Ms Reeves and Sir Keir Starmer’s insistence they growth is their “number one priority”.
Andrew Griffith, the shadow business secretary, said: “There’s no vaccine for incompetence. In the same week they talked about growth, Labour seem to have fumbled a deal with AstraZeneca, one of the UK’s largest companies and central to the critical life sciences sector.
“This is yet another sign that their tax rises and changes to employment law have made the UK an unattractive place to invest.”
AstraZeneca said it will continue to use the existing site in Speke to produce and supply the flu vaccine.
The vaccine project was originally announced by Jeremy Hunt during his last budget in March 2024, saying at the time it represented a “vote of confidence in the attractiveness of UK as a life sciences superpower”.
At the time, Sir Pascal Soriot, the AstraZeneca chief executive, said the factory would “enhance the UK’s pandemic preparedness and demonstrates our ongoing confidence in UK life sciences”.
Earlier this week, The Times reported that Shaun Grady, the UK chairman of AstraZeneca, had appealed to Business Secretary Jonathan Reynolds urging him to sign off on the vaccine project and warning it risked missing its planned timeline.
“This is an urgent issue,” he said.
Labour has attracted criticism for cutting several key investment pledges originally trailed by Rishi Sunak’s Conservatives, such as a supercomputer in Edinburgh. The Chancellor has accused the Tories of leaving behind a multibillion-pound black hole in the country’s financing through unfunded spending pledges.
AstraZeneca’s investment plans have long been subject to a tug of war between Britain and the Republic of Ireland, which has an appealing corporate tax system.
In 2023 Sir Pascal blamed Britain’s “discouraging” tax regime for a decision to build a £320m drug factory in Ireland rather than the UK.
But in March 2024, Jeremy Hunt, the then-chancellor, referred to Sir Pascal as “mon ami” and said that government support had persuaded the business to invest £650m across the Cambridge Biomedical Campus and the now-scrapped Speke site.
Mr Hunt said: “It beggars belief that in a week when the Chancellor has given a speech about being pro-growth, the Government has dropped the ball on such a major manufacturing investment. Words don’t create jobs, but factories do – this is an absolute tragedy.”
It came as business leaders across the economy slashed investment plans, according to a survey by the Institute of Directors (IoD), which also found bosses have cut back their employment intentions in the wake of Ms Reeves’s Budget.
Less than a quarter of companies expect to increase investment this year, the business group found, with almost 40pc planning to cut back spending.
Anna Leach, the IoD chief economist, said the Chancellor’s new focus on growth and investment is not enough to undo the hammer blow dealt by the £40bn of tax increases announced in October.
“The recent shift in the Government’s rhetoric to emphasise growth is very welcome. The focus on unblocking planning constraints and the delivery of major infrastructure investments that will enhance transport capacity and drive innovation are the right ones,” she said.
“But it is clear that companies continue to be challenged by the breadth and scale of cost increases announced at the Budget, and this risks undermining both the investment needed to drive growth and the sustainability of the public finances.”
The IoD survey showed that bosses believed the most effective way to boost the economy would be a reduction in the tax burden on businesses, with an about-turn on the employment rights bill the second most popular option.
Better trading relations with the EU, lower interest rates and a simplification of the tax system were also cited by a significant share of businesses as potentially helpful policies.
