The UK pharmaceutical sector is poised to outperform its European counterparts in terms of growth, but persistent productivity challenges could impede progress and profitability, according to new research by QBE.
QBE’s latest report on the UK life sciences sector projected that pharmaceutical output would increase by 4.1% in real terms in 2023.
This forecasted growth rate is set to outpace that of key competitors in Germany (1.2%), France (2.6%), and Spain (3.7%), although still behind estimates for Italy and Nordic countries.
However, QBE also indicated that the UK’s pharmaceutical output growth is expected to average 1.3% annually from 2024 to 2026, surpassing the predicted growth rate for Italy (1.1%) and Nordic countries (1%) over the same period.
Despite the positive outlook, QBE warned that the sector is facing a series of risks that could impact productivity and profitability in the coming years.
According to the report, the UK economy has been grappling with poor productivity since the global financial crisis, with the life sciences sector faring worse than other segments of the economy.
Between 2010 and 2019, productivity in the life sciences sector declined by an average of 2.7% annually. QBE said this decline could affect price competitiveness and profit margins, as well as potentially deter investment in the sector.
Other emerging risks identified in the report include post-Brexit compliance hurdles, the potential government response to the EU’s recent pharmaceutical package, progress on negotiations regarding the UK’s renewed membership in EU-led funding program Horizon Europe, and healthcare policy developments ahead of the expected 2024 elections.
To foster growth in the sector, QBE recommended that firms prioritise talent retention and attraction, as well as digitalisation efforts.
Furthermore, QBE urged firms to look out for opportunities presented by the transition of medicines and medical product regulation from the European Medicines Agency to the UK’s Medicines and Healthcare products Regulatory Agency.
This transition could offer advantages in terms of operational protocols and could also help satisfy the needs of overseas suppliers seeking to sell into the UK market, according to QBE.
“The changeover in regulation presents real opportunities for firms who are set up to avail of the rapid approval protocols and research and development, both the funding of and talent to deliver, will be key to this,” said Tim Galloway, portfolio manager for life sciences, QBE International.
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