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Impact of the Disinvestment by Astrazeneca at Alderley Park, Cheshire Volume 1: Economic Impact Assessment Final Report

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Impact of the Disinvestment by Astrazeneca at Alderley Park, Cheshire Volume 1: Economic Impact Assessment Final Report Impact of the disinvestment by AstraZeneca at Alderley Park, Cheshire Volume 1: Economic Impact Assessment Final Report Commercial in Confidence 29 January 2014 Impact of the disinvestment by AstraZeneca at Alderley Park, Cheshire Volume 1: Economic Impact Assessment Contents Executive Summary .................................................................................................................. i 1. Introduction .......................................................................................................................... 1 2. Setting the Scene ................................................................................................................. 4 3. Research Method & Impact Parameters .......................................................................... 13 4. The Quantitative Contribution of AstraZeneca at Alderley Park – ‘pre-disinvestment ’ ................................................................................................................................................. 22 5. The Quantitative Contribution of AstraZeneca at Alderley Park – ‘post-disinvestment ’ ................................................................................................................................................. 33 6. The Wider Qualitative effects of disinvestment .............................................................. 37 7. Perspectives on the Spatial Effects and Consequences of Disinvestment ................. 43 8. Conclusions & Recommendations ................................................................................... 47 Annex A: Key Assumptions and Method........................................................................... A-1 Annex B: Key Consultees ................................................................................................... B-1 Contact: Joe Duggett Tel: 0161 475 2109 email: [email protected] Approved by: Simon Pringle Date: 29 January 2014 Director www.sqw.co.uk Impact of the disinvestment by AstraZeneca at Alderley Park, Cheshire Volume 1: Economic Impact Assessment Executive Summary 1. In March 2013, AstraZeneca announced its intention to relocate its R&D functions from its current site at Alderley Park in Cheshire East to a new site in Cambridge, by 2016. The Alderley Park site currently supports around 3,000 jobs directly, and is AstraZeneca’s largest R&D facility globally. 2. As one of the most significant knowledge-based economic drivers in Cheshire and the wider North West of the England economy, the effects of the relocation will be significant. In response, the Task Force established to mitigate the impacts of the relocation commissioned SQW Ltd to undertake an independent economic impact assessment of the quantitative and qualitative effects of the disinvestment. 3. This economic impact assessment covers the direct, indirect, and induced effects of the Alderley Park site . In characterising these effects, the assessment has been undertaken from a work-place (rather than resident) based perspective. The assessment does not cover local or national taxes, the likely future employment and locational intents of current AstraZeneca staff, or estimate the potential effects on local land and property markets. 4. The impact area covered by the assessment encompasses the functional economic geography of Cheshire, Warrington, Greater Manchester, and proximate areas to the east and south of the Alderley Park location . Over 90% of current permanent employees at Alderley Park reside in this impact area. 5. As such, this assessment is a key analytical element of the work that the Alderley Park Task Force, working through its Executive Group, has commissioned to deliver a vision and delivery plan for the Alderley Park site, both absolutely and in the context of the wider regional content within which the site sits. 6. This economic impact assessment has been separated explicitly from complementary work, reported in the Volume 2: Future Market Demand Assessment report, which reviews future market interest in the Alderley Park facility. The impact assessment does not, therefore, made any assumptions regarding the scale and nature of the future use of the site. The focus is on what the current economic contribution of AstraZeneca is at Alderley Park ‘now’ pre- disinvestment, what it will be post-disinvestment, and with the economic impact the difference between the two. Of course, should market demand proved to be high and take-up strong for the sites and premises subsequently vacated by AstraZeneca, the ‘net’ scale of the impact will be lower than this ‘gross’ AstraZeneca-focused assessment suggests. The Quantitative Effects 7. The assessment of the quantitative effects of the relocation is based on two different scenarios: • the pre-disinvestment economic contribution of AstraZeneca at Alderley Park, based on its current profile of employment and economic activity i Impact of the disinvestment by AstraZeneca at Alderley Park, Cheshire Volume 1: Economic Impact Assessment • the post-disinvestment economic contribution of AstraZeneca at Alderley Park, based on the retention of 700 non-R&D roles at the site. 8. The pre-disinvestment annual contribution of AstraZeneca at Alderley Park to the impact area is estimated to be around £315m p. a. including direct effects (£270m), and indirect and induced effects (together comprising £45m). 9. This represents the best estimate of the potential maximum annual economic impact of the disinvestment by AstraZeneca at Alderley Park assuming full withdrawal and disinvestment, although some of this value is likely to be retained as some employees remain resident in the area. The site currently has around 3,000 jobs on site, with indirect and induced effects supporting a further 1,050 jobs in the impact area. 10. The post-disinvestment annual contribution of AstraZeneca at Alderley Park to the impact area is estimated to be around £70m p.a. including direct effects (£61.4m), and indirect and induced effects (together £8.5m). Under this scenario, the site would support 700 non-R&D jobs on site, and a suggested further 200 or so jobs in the impact area. 11. Subtracting the post-disinvestment contribution from the pre-disinvestment contribution provides an estimated economic impact of the relocation on the impact area of £245m per annum . The annual Gross Value Added (GVA) of the Cheshire and Warrington economy is around £20bn – the impact of disinvestment therefore would be a reduction in the size of the total sub-regional economy of around 1.2%. Over a 10-year period, the discounted aggregate effect of relocation on the impact area is estimated at £2.1bn . 12. A spatial analysis of Alderley Park shows that the majority of the employment impact will fall within Cheshire East, where 1,580 of the on-site AstraZeneca employees live, accounting for 1% of the total employment in the authority’s area. These employees also earn considerably more than the other Cheshire East residents, with salaries approaching two times the local average. Salaries of AstraZeneca employees across the impact area tend to be significantly higher than those of other residents, indicating the importance of the Alderley Park site in providing high value employment across this wider functional space. 13. The potential scale of employment impact at Alderley Park is of the order of recent comparators, including Pfizer’s disinvestment from its R&D facility in Sandwich. However, in the wider context of economic ‘shocks’, where supply chains are not locally concentrated or where suppliers are specialist (both of which apply at Alderley Park), the overall long-run scale of the shock on its immediate and proximate area is likely to be less intense than for some other occurrences of disinvestment . Further, in the case of Alderley Park, the economy of the impact area is resilient and well-placed to respond to the shock. This said, impacts will however be felt in local supply chains, such as hotels, catering establishments, taxis and other localised/personal service providers etc. and Wider Qualitative Effects? 14. The assessment of the qualitative effects of AstraZeneca ‘s decision on the future of Alderley Park, set against five identified routes to wider impact, reveals the following key messages: • Adding value to existing business and research activity to drive improved business competitiveness . AstraZeneca currently provides financial support and ii Impact of the disinvestment by AstraZeneca at Alderley Park, Cheshire Volume 1: Economic Impact Assessment sponsorship to a number of business groups including the NW Business Leadership Team, Cheshire Business Leaders, and Bionow. The evidence gathered from consultees suggests that some of this funding and capacity support is likely to be lost in the future, although its scale, in aggregate terms is limited. • Acting as a focus around which new business and knowledge activity develops, boosting employment and economic resilience. It was reported by consultees that, with notable exceptions, AstraZeneca’s operations at Alderley Park have not been focussed directly on supporting new business formation or Open Innovation activity. However, Alderley Park has played a crucial role in attracting and retaining highly skilled people to the North West, which in turn has supported wider cluster development efforts. Were AstraZeneca to decide to retain some R&D ‘access’ on site which could support in-movers (as has happened, for example, at GSK Stevenage, albeit in a different context), this could
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