Ministers fear Glaxo merger could damage drug industry

Senior ministers are concerned that the proposed merger between Glaxo Wellcome and SmithKline Beecham could damage the long-term future of the drug industry and the British economy. Andrew Yates reports that the Government is likely to back union demands for the protection of thousands of research and development jobs.

Margaret Beckett, President of the Board of Trade, and Gordon Brown, Chancellor of the Exchequer, are both understood to be alarmed that the proposed creation of the biggest drugs company in the world could lead to substantial job losses among skilled scientists. They consider such a loss of important technical staff would be bad for future scientific research and for the British economy.

MSF, the white-collar science union, is currently seeking undertakings from Glaxo and SmithKline that they will not close any R&D facilities as a result of the merger, amid growing concerns about substantial redundancies. The Labour Government is now expected to require such undertakings before allowing the merger to take place.

The authorities are also thought to be looking at forcing the merged company to dispose of one or more top-selling drugs to prevent it from dominating some specialised markets, even though its share of the world pharmaceuticals market as a whole will be less than 10 per cent. For example, Glaxo sells Zovirax, the main anti-herpes treatment, while SmithKline has Famvir, its main competitor.

The MSF will this week step up its campaign by calling a meeting of its Parliamentary Committee. More than 80 MPs are members of the MSF, including Chris Smith, the Culture Minister.

The union will also attempt to increase the pressure on the drugs companies to discuss their cost-cutting plans. The MSF has lobbied furiously for more information about job losses ever since Glaxo and SmithKline announced merger talks 10 days ago. However, the companies have refused to comment on possible redundancies.

Paul Talbot, national secretary for the pharmaceutical industry at MSF, said: "The fact that Glaxo and SmithKline have not talked to us is really not acceptable. A convincing case for this merger has yet to be established."

The union is now pursuing a meeting with Margaret Beckett and Karyl van Miert, the European Competition Minister, as soon as possible to push forward its concerns.

The MSF is confident that Margaret Beckett will move to protect research and development expenditure and jobs. Mr Talbot said: "We don't want Margaret Beckett to just nod through this deal and leave it up to the EU competition authorities.

"Mrs. Beckett has indicated in the past that R&D is a concern, and the Treasury has also been a generous supporter of research and development in this country."

The MSF is threatening legal action if the companies continue to ignore a European law that requires them to speak to employees in the event of forced redundancies.

Together, Glaxo and SmithKline will become a huge force in the drugs industry, with an R&D budget of pounds 2bn a year, representing a fifth of all R&D spending in the UK. If that budget was cut as the companies slashed costs, it would be a severe blow for Britain's scientific community.

Glaxo and SmithKline altogether currently employ more than 4,000 research and development staff. Glaxo's main research facility is at Stevenage in Hertfordshire, which was opened at a cost of pounds 700m in 1995 and houses 1,700 workers. SmithKline employs 2,000 people at its new pounds 250m research site in Harlow, Essex.

Overall, the two companies employ 21,000 people in the UK and 107,000 worldwide. Unions fear up to 10,000 job losses globally, 2,000 of which could occur in the UK.