GlaxoSmithKline (GSK) has announced £350 million plans to build its first new UK production plant for almost 40 years in Ulverston, Cumbria

GlaxoSmithKline (GSK) has announced £350 million plans to build its first new UK production plant for almost 40 years in Ulverston, Cumbria. The move follows the UK 2012 budget announcement, which included further reductions to the corporate tax rate and, according to chancellor George Osborne, ‘unashamedly backs business’.

Osborne said in his October 2011 spending review that he would reduce corporation tax and introduce a policy devised by the previous administration: a ‘patent box’ that would reduce the tax collected on company profits generated from intellectual property to encourage R&D investment in the UK. The main rate of corporation tax would fall from 28% to 24% over four years from 2011. And the tax rate on profits generated from IP would be reduced to 10% from April 2013.

GSK welcomed the plans and, in November, responded with a promise of £500 million in manufacturing investment that would create 1000 jobs.

The company has now added detail to those plans. It will start construction in 2014 or 2015  at Ulverston, where it already has a site employing 240 people to manufacture antibiotic ingredients. It will then take six years for the plant to become fully operational. In addition, GSK will invest £100 million in its two manufacturing sites in Scotland - the sites at Montrose and Irvine - and £80 million at its sites at Ware and Barnard Castle.

The company said it was considering doubling the investment at Ulverston - to £700 million - if the government continued to improve the ‘environment for innovation in the UK’.

The wider pharma industry was heartened by the further reductions in corporation tax announced by Osborne. The basic rate will now fall to 24% next month - it is currently 26%. It will then fall to 23% in 2013 and 22% in 2014. Meanwhile, Osborne backed up support for industry with a further £100 million for scientific research at UK universities. Stephen Whitehead, chief executive of the Association of the British Pharmaceutical Industry, said that the budget had not contained many surprises. But he welcomed the extra tax relief for industry which he said would ‘allow pharmaceutical companies operating [in the UK] to remain competitive in a global market’.

RSC chief executive Robert Parker said that big pharma had endured ‘a real rollercoaster ride in the last two years’. He added: ‘This announcement by GSK is fantastic news and hopefully a sign of bigger and better things to come from the industry.’ The RSC has supported the patent box since it was first suggested in 2009.

The chemical industry was more critical of Osborne’s plans. Steve Elliott, Chief Executive of the Chemical Industries Association, said that the UK is still lacking a ‘joined-up and long-term industrial policy’. He said the UK government needs to do more to support energy intensive industries from high energy costs. He welcomed the support for R&D but was ‘gravely disappointed’ that similar support will not be provided for companies looking to renew the equipment in their plants - support that is needed for the lower corporation tax to become relevant.