An over-reliance on metrics such as benefit cost ratio to assess the value of innovative life sciences manufacturing may mean the UK is missing out on strategic investments, according to research published by the Association of the British Pharmaceutical Industry (ABPI).
"Left unaddressed, this could undermine the UK’s ability to land internationally mobile investments amid fierce global competition," it said.
The conclusions are based on an analysis of the application and design of the HM Treasury Green Book, used by public bodies to appraise policies, programmes, and investment proposals. It provides a standardised framework for evaluating costs, benefits, risks and value-for-money to support evidence-based advice to UK ministers and underpins business cases across government departments.
But the ABPI's analysis, which was carried out by Cambridge Economic Policy Associates (CEPA) indicates that because of the Green Book’s design and application, the major benefits of investing in innovative life science manufacturing are not fully captured. This situation is impacting the appraisal process for the Life Sciences Innovative Manufacturing Fund (LSIMF), a capital grants scheme designed to attract such investments into the UK, it said.
The CEPA analysis indicates that LSIMF assessment process places a disproportionate focus on benefits that can be readily monetised, such as short-term job creation. However, new manufacturing investment can bring increased productivity, improved international competitiveness and export growth, and the formation of clusters more evenly distributed across the UK.
As a result of this situation, the ABPI is calling on the government to continue its work on improving the tools it uses to assess how it supports potential investment opportunities.
Recommendations from the CEPA analysis include:
• Introduction of a more comprehensive appraisal framework to reduce over reliance on benefit cost ratios and to strengthen non-monetary benefits within decision making.
• Increase the predictability and transparency of the LSIMF process.
• Ensuring proportionality and timeliness of the LSIMF process.
“We urge the government to use its existing review of how it values investment as an opportunity to improve how this country values and attracts future life sciences manufacturing. We’ve already seen the government introduce welcome improvements to the capital grants programme, but we must go further and faster. Doing this is critical to delivering regional growth and the jobs needed to grow our economy and support greater investment in public services,” said Richard Torbett, chief executive of the ABPI.
CEPA added that the current 2025 Green Book Review, which was commissioned by the government, is looking to implement improvements which closely align with those suggested by the report.
David Jones, director of CEPA said: “The UK government has an unequivocal economic growth mission, and has identified advanced manufacturing and the life sciences as two sectors with the 'greatest growth potential over the next decade'. As such, in line with HM Treasury's recent review of the Green Book, we recommend that appraisals for LSIMF capital grants seek to be as comprehensive, systematic and transparent as possible when assessing the range of benefits from investments in innovative life sciences manufacturing. This will ensure that the LSIMF - which is already viewed as a valuable form of support by industry - leverages its full potential as a tool for attracting investment and stimulating UK competitiveness.”
Life sciences is a key element of the UK Government plan to boost the country's economy as set out in its Modern Industrial Strategy which was released earlier this year. This was followed by a specific Life Sciences Sector Plan which aims to position the UK as the leading life sciences economy in Europe by 2030, and the third globally by 2035, behind the US and China.
Further reading:
• Life Sciences leadership: The UK and the EU set out plans for sector growth and investment
• SCI research: UK life sciences missing out on billions through competitiveness gap
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