By Oliver Dean

Copyright cityam

Merck and AstraZeneca’s withdrawal from UK investment is a warning signal to Rachel Reeves – but is she listening? Asks Oliver Dean

Both AstraZeneca and Merck’s decision to abandon their respective UK expansions is more than a corporate setback. It is a catastrophic loss of jobs, investment and future innovation and the public are now poorer as a result. Time and again, the government has boasted that it is pro-growth and pro-business, but unless it changes course on its economic strategy, more and more firms will abandon Britain, and more and more people will be worse off.

As many have pointed out, Merck’s decision did not come out of the blue. For years, the life sciences sector has warned that Britain undervalues medicines and punishes success. Sir John Bell, a leading British scientist, hit the nail on the head when he argued that Britain has, “great science in academia” and “great biotech companies,” but without large businesses properly committing, “it isn’t going to work.” Big Pharma’s retreat is proof that the warnings were not idle.

But perhaps the most pertinent point to make is that this retreat is not restricted to the pharmaceutical sector. Business confidence in the government is on the decline and has been for well over a year. Since the government came into office, firms have been sounding the alarm but the Chancellor has repeatedly ignored them. The Institute of Directors’ Economic Confidence Index sat at -72 in July, down from -53 in June, signalling businesses remain overwhelmingly pessimistic about the direction of the British economy.

Plunging business confidence

The British Chambers of Commerce now expects business investment to grow by just 1.6 per cent in 2025, far weaker than earlier forecasts of 4.8 per cent. Coupled with unemployment being tipped to climb to 4.6 per cent by the end of the year, it is evident that business confidence is dropping.

To make matters worse, in July 2025 the UK economy flatlined with growth stagnating. Alongside this, more than 125 businesses have signed an open letter in partnership with the Jobs Foundation, urging the government to deliver tax relief to help get young people into work. Their plea has so far been met with silence.

This silence is telling, however. It paints the picture that the government views businesses and the investment they bring as secondary.

Businesses are telling the government loud and clear that Britain is becoming a harder place to invest in, to hire people and to grow. Yet the response from Labour has been more tax and more uncertainty

Businesses are telling the government loud and clear that Britain is becoming a harder place to invest in, to hire people and to grow. Yet the response from Labour has been more tax and more uncertainty.

If firms believe Britain offers low returns and high risk, they will go elsewhere and they will take their jobs, investment and research with them. That leaves ordinary Britons paying the price through weaker growth, stagnating wages and overstretched public services.

The government must face up to reality. A growing economy goes hand in hand with businesses that feel welcome. That means reversing punishing tax hikes that discourage investment. It means providing regulatory stability, particularly in high-value sectors like life sciences, technology and advanced manufacturing. It means rewarding innovation with credible tax incentives rather than suffocating rebate schemes. And it means publishing a serious growth plan in the upcoming Budget that shows that Britain is once again open for business. As the Shadow Chancellor Mel Stride put it recently, we need “responsible radicalism” when it comes to our economy, and we need it now.

Labour insists it is the party of growth. The Chancellor bragged that this would be the most pro-business economy in modern British history. But soundbites are not what delivers growth. It requires a government that sees business not as a magic money tree, but as a partner it can work with. Merck’s retreat has signalled that the Chancellor needs to get her act together, and her budget is the perfect opportunity to prove that she has.

Oliver Dean is a political commentator with Young Voices UK. He studies History and Politics at the London School of Economics and Political Science (LSE) where he is the President of the LSE Hayek Society.