Glaxo new build decision defies laws of time and space. Or have I misread the story?

March 23, 2012

Tudor Rickards

The day after the Budget, Glaxo announces plans to build a new factory in Ulverston, England, influenced by financial changes favourable to the industry. The timing seems to defeat principles of business decision-making processes until we look more closely at the story

The Mail outlined the background to the decision which will create 1000 jobs in England and Scotland in the pharmaceutical industry

Britain’s £10billion pharmaceutical industry was given a welcome boost yesterday as drugs giant GlaxoSmithKline announced plans to create 1,000 jobs. The company, which employs 15,000 UK workers, confirmed it is pumping £500million into its manufacturing sites. This includes building a new factory at Ulverston, Cumbria – the firm’s first in 40 years. GSK’s move was influenced by tax cuts in the Budget on money invested in research and development. Sir Andrew Witty, GSK’s chief executive, said the introduction of a ‘patent box’, which cuts corporation tax rates on profits from UK innovations, fuelled the decision.

As well as building the new factory, it will inject £100million into Scottish sites at Irvine and Montrose, and £80million at its site in Ware, Hertfordshire, to boost capacity for inhalers and at Barnard Castle, County Durham, for skin-care products.

A lightning fast reaction?

Good news for Britain. But how was the company able to make the announcement within hours of the budget announcement? Perhaps in part because as the article continued:

Sir Andrew, who is part of the Prime Minister’s business advisory group, said: ‘The patent box has transformed the way in which we view the UK as a location for new investments.’

First new build for forty years

The BBC reporting threw more light on the developing story

Glaxo made its announcement after Chancellor George Osborne confirmed in the Budget on Wednesday that the government would go-ahead with the introduction a so-called patent box.
These allow corporations to pay a lower rate of tax on profits generated from UK-owned intellectual property.

“The introduction of the patent box has transformed the way in which we view the UK as a location for new investments, ensuring that the medicines of the future will not only be discovered, but can also continue to be made here in Britain,” said Glaxo chief executive Sir Andrew Witty. “Consequently, we can confirm that we will build GSK’s first new UK factory for almost 40 years.”

A little more history

Tucked away at the end of the BBC article was a little more history of the way the decision was reached. Glaxo said last year that it would build a new facility at one of four potential sites in the UK if a patent box, [the favourable change in intellectual property taxation] first proposed by the Labour government in 2009, was brought in.

News breaks quickly but may have been a while in the making

So maybe the decision reported as if it followed the announcement in the budget was actually the public announcement of a carefully planned business strategy. It would have involved quite a bit of behind-the-scenes negotiations.

Something old, something new?

Another fact not mentioned in the current news story: Glaxo has a great deal of local knowledge of Ulverston. The image (from the company website) is of the plant built there in 1948.


Budget Notes and Car Park Economics

March 25, 2010

Yesterday (March 24th 2010) I missed much of the budget speech by the Chancellor, Alistair Darling. Although, you can’t miss such an event these days, as it remains on line and available unexpurgated except in those parts of the World which have fallen foul of Google, and/or been indulging in a bit of web-censorship

As a matter of fact, I caught some of the budget speech while I was driving back to Tudor Towers (which is how a colleague and sometime class warrior refers to the modest Northern HQ of LWD).

Never mind the dangers of using mobile phones while driving. Listening to AD while driving was pretty damn dangerous too. You can be become far too relaxed by the soothing and gentle monotony. Rockaby baby time. Far worse than a dodgy accelerator pedal.

Then the opposition replies. First, dancing Dave, all sound and fury. I pictured him as rosy-cheeked with rage, but later I saw he had gone white with fury. And then, I’m not just a Nice Guy Nick, almost succeeding in attacking in a way that didn’t sound like an echo of Dave’s rant.

More Rottweiler than Dead Sheep

Those in the know say that Alistair is his own man. Won’t be bullied by Gordon. Not like, say, that equally soothing politician of yesteryear, Geoffrey Howe ,who eventually turned and savaged Margaret Thatcher, more a Rottweiler than the dead sheep he had been cruelly called by another tormentor.

I couldn’t help thinking that Darling’s speech had a charm that would have been lost if it had been delivered by Gordon Brown. There were still the careful constructions which, together with the delivery, created a reality in which Government had pretty-much rescued the country from meltdown. Gordon eventually drives you to sleep with an unremitting hail of statistical blows. Alistair is more hypnotherapist than pugilist.

By the end of the day I had overdosed on the speech and its implications. I didn’t need any more explanations of why not one of the main parties had been specific about what’s going to be cut in order to meet what fiscal deficit based on what assumptions.

A starter for ten

Here’s a starter for ten. Back of a car-parking ticket stuff. Everyone has fewer assets than they thought a couple of years ago. Not just in the UK, but let’s stay local geographically. If we tot up what we own and what we owe, the answer is a bit closer to a nasty red debt figure than a nice blue credit one. No politician is saying, but the change in expectations of personal debt is quite a few percentage points. Anyone arguing it’s less than say 30%? No? OK. So we are all quite a bit poorer than we believed a few years ago. That’s a lot of pain, household by household.

All this talk I heard of politicians not being able to say anything more specific until ‘the books are open’, or ‘the figures for 2010 are available’ is just a bit disingenuous. And another reason why even gentle, honest-sounding politicos like Alistair Darling are lumped together with those found guilty of fraud, pimping, or just blatant self-serving behaviours.


Brown’s Budget Week Anti-sleaze Shock

April 22, 2009
John Pienaar

John Pienaar

On the eve of the budget, Prime Minister Gordon Brown grabs headlines with an announcement about MP expenses. BBC’s John Pienaar suggests how such a leadership decision might be analysed

Budget day [April 22nd 2009] but there is another story dear to the hearts of MPs preoccupying our parliamentary representatives. Yesterday, Prime Minister Brown did something quite unexpected, both in message and medium chosen to communicate it. In a U-tube video he announced that he intends to move swiftly against the deeply unpopular system of MPs expenses. Unpopular that is for the public at large, but seriously popular for the majority of MPs benefitting from current arrangements.

The shock was partly because Brown had appeared to be ducking the issue of acting swiftly over the contentious issue, aided by an on-going investigation by Sir Christopher Kelly.

All the signs were that public outrage over bankers was now transferring to public outrage over MPs expenses, threatening career-damaging results for the Government. Opposition MPs, unlikely to be found completely unsullied through such revelations, are likely to suffer from what might be called friendly fire in the battle.

Maybe the shock was partly also because of a simplistic stereotype of Gordon Brown as a vacillating leader unable to act decisively or imaginatively. It is easy to make the case as a mood of national frustration with events is sweeping all before it. This week, one paper labelled Gordon the worse Prime Minister of all time.

The stereotype has been useful shorthand in countless attacks on the Prime Minister in the media and from political opponents in Westminster. My point here is not to defend Brown as to point out the possibility that there is some contrary evidence in past behaviours. When he was Chancellor of the Exchequer, Gordon Brown revelled in startling budget day stories which at very least kept opponents on the back foot at the time. One of his first actions as a new Chancellor was to relinquish control over the Bank of England (retrospectively challenged, but at very least imaginative and decisive.

Why did Gordon act so decisively?

BBC’s John Pienaar spotted the point. Commenting on the newly released U-tube he observed that such decisions operated at several different levels, so it was hard to arrive at a simple explanation of specific whys and wherefores.

In other words, it’s too simplistic to assume Gordon acted to appease public opinion, or out of moral indignation, or because he didn’t want Alistair Darling to grab the headlines or because he wanted to find news that would play better than likely reaction to the budget. As academics like to say, it was a decision made under conditions of considerable uncertainty. Unfortunately, the academic acceptance of ambiguities does not fit comfortably in a culture impatient for answers This is contrary to the ‘Yes or no, it’s a simple question’ approach of Jeremy Paxman in his Newsnight interrogations).

Can’t we do better than that?

I geenrally find more in Pienaar’s thoughtful approach than in Paxman’s petulance. I also assume share Pienaar’s view that political decisions are made after consideration of a large number of salient features. That’s a hypothesis based on an assumption that political leaders plus advisors operate under complicated and uncertain conditions, in which the important questions are not amenable to yes/no, right/wrong resolution. Unfortunately, Pienaar’s point remains unsatisfactory to the extent that it offers little on how a leader might be advised to take major decisions.

Might we be able to assess whether Gordon Brown was acting effectively and decisively, or ineptly and impulsively? Or am I also falling into either/or thinking? Can’t we do better than just accepting the ambiguities around strategic decision-making?

Maybe

Put another way, what sense might we make of the decision by Gordon Brown to act how he did, when he did? The decision reversed a more measured approach to the issue of MP expenses, (the on-going investigation) and one which he himself appeared to approve of until the announcement?

Thumbing through my leadership notes, I find useful suggestions. Under conditions of extreme pressure, a leader is more prone to resort to favoured strategies which may override rational considerations. Information is filtered to conceal some of the complexities of the situation. Bob Woodward’s accounts of the Bush regime contains repeated illustrations of denial and doubtful decisions.

Overall, this decision also seems consistent with another favourite principle I have written about. In an earlier post, I looked at a Gordon Brown decision when he was Chancellor. He grabbed the headlines with support for England’s bid for the 2018 World Cup.

At the time I compared the decision to The Tarrasch principle in chess.

[The Tarrasch principle] suggests that strategically you should act because you want to, or because you have to, but not simply because you have the option. Mr Brown acted because he wanted to, perhaps also because he judged it was better now than waiting for a more favourable time, and in that sense because he had to, or miss a promising opportunity. In other words, it was not just because it was an available option open to him.

Which doesn’t tell us precisely what informed the Prime Minister’s decision, but it might make sense of it, and serve as a guide to leaders facing tough decisions.