The first thing I checked this morning was the outcome of the Brexit vote, and what sad news when I read Brexit won. It was close, but the only thing that matters is the end result. Now, what will be the impact of such a vote on the UK biotech scene? The result will be significant, as it will impact regulation, finances, employees, cooperation and research.
On a general level, the post-brexit forecasts are pretty dire. According to HSBC: the pound could collapse by as much as 15%, a 3% to 4.5% jump in inflation could be expected by late 2017 and the GDP might be 1% to 1.5% lower in 2017 than it would have been otherwise.
When you look at the details for one single industry, i.e. biotech, the impact could be even worse.
16% of UK research funding comes from the EU
Let’s start with research. 16% of research funding come from the EU. The Brexit will obviously cut that funding off. Roger Perlmutter, head of R&D at MSD told the FT that Britain’s withdrawal from the EU would be ‘challenging’ for its scientists, who had ‘benefited from a world where they receive such grants’.
Cooperation will be impacted as well, because borders will make it more complicated. John Lechleiter, the CEO of the US pharma giant Eli Lilly, told the Financial Times that they considered their UK Surrey-based facilities as the ‘European centre‘ for their operations and to undergo Brexit would really isolate the UK.
The EMA is looking for a new office …
Yes, the European Medicine Agency will have to move its headquarters out of London, as every European institution has to be located in a country of the European Union. This will be of major impact on the lobbying power of the UK on drug regulations.
A Brexit means also that the UK, if it wants to continue selling on the European market, will have to comply with European regulations without having any influence on them. This could have a significant impact on biotech companies emerging in new fields such as cell therapy that are by nature more sensitive to regulations.
Where would the EMA go? It’s hard to tell, but it could be any other major European city. Maybe Berlin?
Talent, talent and talent
Talent is one of the most important assets of a company.
It’s now probably one of the major concerns for UK Biotech companies. Will the Brexit have an impact on their capabilities to attract talent from abroad and to retain them? According to Deloitte, the risks on the labour force is ‘high’. Academics may leave the UK for countries with easier access to European grants and more international collaborative research projects. Biotech employees may be annoyed if they become subject to residence, visa or work permit controls (from my experience in the US, I can tell you that it’s super annoying).
As Ian Nicholson, CEO of F2G, told FierceBiotech: “approximately 25% of our highly skilled staff (both scientific and our CFO) are from other EU countries. We rely on the current freedom of movement for these individuals.”
Finances could be hurt
The first factor could the ‘financial attractiveness‘ of the country for foreign investment, especially coming from the rest of Europe. The UK BioIndustry Association (BIA) is worried about it, even though it’s very hard to predict how big the impact will be.
The other ‘institution’ that could be hurt is the City, London’s famous financial district. By being in the EU, the UK was able to lobby in favor of financial deregulation. This resulted in very few changes after the 2008 crisis even though London was a major contributor to it. With the UK out, the EU could introduce more strict financial regulation (for example a tax on every transaction or regulate fiscal paradises such as Jersey, Guernsey, and former British colonies). This may impact biotech companies listed on the London Stock Exchange as it would make London less attractive.
Overall, this looks really bad for the UK biotech scene. The arguments listed here are what can be predicted, but as Steve Bates from the BIA told FierceBiotech: “If the U.K. votes ‘out,’ well frankly we don’t know what the full implications of that decision will be.” Let’s wait and see …