U.K.’s Early Pandemic Chaos Spurred Revival of Key Manufacturing

(Bloomberg) --

As soon as Novavax Inc. announced the latest global breakthrough in coronavirus vaccines, Prime Minister Boris Johnson made a point of celebrating the corner of northeast England where the doses will be made.

While he is relying on vaccination as Britain’s route out of the economy-crippling pandemic that has claimed more than 100,000 lives, his intervention late Thursday reflects the shift in focus after decades of industrial decay hobbled his government’s response to coronavirus last year.

Then, with the disease tearing through care homes and hospitals, ministers were forced to explain that nurses had no protective equipment because U.K. factories weren’t making it, and there were not enough tests because facilities had to be set up from scratch.

An event in April highlighted just how desperate things were. A military plane was dispatched to Turkey to bring back vital clothing for health workers, but when it returned much of it couldn’t be used because it didn’t meet U.K. standards.

The government estimates that before the pandemic, the U.K. produced about 1% of the protective equipment it needed. It’s now about 70%, illustrating a re-assessment of the importance of self-sufficiency.

‘Lamentable’

The shift can also be seen in vaccines, which pre-pandemic had a manufacturing base described by Oxford University professor John Bell last July as “lamentable.” That is now a key government priority and the U.K. is outpacing its European neighbors, sparking a trade row with Brussels.

Critics point out that historically it’s been Johnson’s Conservative Party that has been opposed to investing in companies to shore them up against global competition, leading to a hollowing out of British industry.

But a rethink that started with support in former industrial heartlands for leaving the European Union has been bolstered by a pandemic that forced ministers to prioritize manufacturing and supply chains.

“If the Covid crisis has taught us one thing it is that this country needs to be ready for what may be coming,” Johnson said in a June speech meant to mark a reset after the first wave of coronavirus infections. “We need to be able to move with levels of energy and speed that we have not needed for generations.”

‘Build Back Better’

For the prime minister, his 2019 election pledge to “level up” deprived regions of the U.K. easily morphed into a promise to “build back better” from the pandemic because the same former industrial heartlands -- some of which had already reinvented themselves as high-tech clusters -- would be central to both ideas.

Johnson’s administration has faced intense criticism over its handling of the pandemic, with the highest death toll in Europe and numbers still rising. But the vaccine program is rapidly becoming a bright spot.

To date, the government has invested some 230 million pounds ($315 million) in facilities in places including Braintree in Essex, Harwell in Oxfordshire, and Livingston in Scotland -- which Johnson visited this week.

And U.K. orders for 367 million vaccine doses have spurred extra manufacturing in plants including the Fujifilm Diosynth Biotechnologies facility in Billingham, Teesside which will make the Novavax shot.

‘Activism’

“Vaccine development has worked because it has been a strategy of activism not laissez-faire, with the government, companies, universities and investors working jointly to achieve results,” Greg Clark, chairman of the House of Commons Science and Technology Committee, told Bloomberg.

Fujifilm, already a large employer in Teesside -- a region Johnson visited early in the 2019 general election -- is likely to end up employing more than 400 people on the Novavax project, according to Ben Houchen, the region’s Conservative mayor.

“It means better quality, well paid jobs, significantly above the average wage for a region like Teesside,” he said in an interview. That “means more disposable income for local people which drives up living standards.”

It makes electoral sense to spur investment in areas such as Teesside, a longtime Labour stronghold where Johnson’s Tories have made dramatic inroads, notably with the election of Houchen in 2017.

Of the eight parliamentary seats either wholly or partly in the region, the Tories took one off Labour in the 2017 General Election and another four in 2019, including Sedgfield, previously held by former Labour Prime Minister Tony Blair. Local council elections are due to be held across the country in May.

‘National Security’

Coronavirus “demonstrates there are key industries that by definition the U.K. government should be prioritizing and making sure we have a U.K. presence: it’s an issue of national security, national health,” Houchen said.

Early in the pandemic, ministers rushing to secure ventilators also enlisted manufacturers including Airbus, Siemens, Smiths Group Plc and the Mercedes and McLaren Formula 1 teams.

“Businesses across the country stepped up during this pandemic to fill the gap, making vital medical equipment like ventilators and hand sanitizer,” said former Labour Party leader Ed Miliband, now the opposition party’s business spokesman. Reliance on critical goods shows the need for “strong domestic supply chains and a real industrial strategy,” he said.

Miliband said the government should look beyond the pandemic to bolster automotive and aerospace manufacturing by spurring investment in battery and technology supply chains.

The Tories may just do that. Ministers are rejigging plans to direct spending toward poorer regions and industries that can help regenerate them. A person familiar with the matter cited the target for net-zero greenhouse gas emissions as driving investment into areas Johnson promised to “level up.”

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