Zero‑tariff deal with US positions UK for high-value pharma manufacturing

Having secured zero U.S. tariffs on pharmaceuticals made in the United Kingdom, Britain is well-positioned as it looks to become a hub for drug R&D and manufacturing, find reports from credit insurance company Atradius and data and analytics firm GlobalData.

“The UK has secured a zero percent tariff on pharmaceutical exports to the U.S., in exchange for a significant concession on medicine pricing,” according to Rubén del Río Hernández, a pharma sector specialist for Europe and team leader of the Large Buyer Unit at Atradius CyC, Madrid, Spain. “The agreement with the U.S. has removed a major external risk to pharma exports and is boosting confidence in export-based manufacturing.”

Last month, the Trump administration negotiated an agreement to exempt UK-made pharmaceuticals and pharmaceutical ingredients exported to the U.S. from so-called Section 232 tariffs, while refraining from targeting the UK’s drug pricing practices in any future Section 301 investigations for the duration of Trump’s term.

At the same time, under the deal the UK will spend 25% more for new medicines — the first major increase in over 20 years — implemented through changes to the National Institute for Health and Care Excellence (NICE) cost-effectiveness thresholds.

“Zero-tariff access to the U.S., combined with more predictable and generous domestic pricing, gives the UK a rare structural advantage in attracting early launches, clinical trials, and high-value manufacturing,” Edita Hamzic, healthcare analyst at GlobalData, said in a statement.

By comparison, under separate Trump trade deals with the European Union and Switzerland, EU and Swiss pharma companies are subject to 15% import tariffs. Nonetheless, the Atradius report notes that there are exemptions granted to Europe’s pharma companies that have agreed to increase production in the U.S.

“This limits the impact of tariffs on the sector in the EU,” according to del Río Hernández “However, moving manufacturing to the U.S. requires substantial capital investment and operational restructuring, posing challenges for smaller companies with limited resources.”

Ray of light for UK

Atradius ranks the UK’s pharmaceutical industry forecast as “good” with a credit risk situation in the sector that is “benign” and business performance above its long-term trend. It’s a more optimistic picture from less than a year ago when the Association of the British Pharmaceutical Industry (ABPI) warned that the country was becoming “un-investable from a global perspective” for pharma companies.

In early 2025, ABPI and major pharma companies said that future UK investment was at risk and called for addressing an “unsustainable levy” on manufacturers. To address their concerns, last month the UK government announced that the 2026 payment rate for newer medicines under the Voluntary Scheme for Branded Medicines Pricing and Access (VPAG) would be 14.5%, down from a record 22.9% in 2025.

According to Hamzic, the UK’s combination of tariff-free U.S. access and improved domestic pricing “creates a compelling near-term proposition for early launches and advanced manufacturing, particularly for innovators seeking speed and predictability.”

Bristol Myers Squibb CEO Chris Boerner said in a statement last month that with the British government’s commitments under the deal with the U.S., his pharma company anticipates being able to invest up to $500 million in the UK over the next five years.

“This investment will come across multiple areas of the business including research, development, and manufacturing,” according to Boerner, who added that it is a “sign of progress and one that creates an environment conducive to our continued presence in the UK.”

British Prime Minister Keir Starmer has pointed to major companies such as BioNTech, Bristol Myers Squibb, and Moderna investing billions of dollars in the UK, with his government’s stated goal of becoming Europe’s leading life sciences economy by 2030.

EU hurdles remain

The path will be more challenging for other European countries. The Atradius report contends that “most of the individual markets in Europe are highly regulated and many feature constraints that could impact pharma profits,” while facing competitive disadvantages as more pharma businesses are expected to invest in China and the U.S.

“Despite well-established manufacturing facilities, secure supply chains and high production standards, the EU is facing gradually decreasing competitiveness in innovation,” del Río Hernández contends. “This is due to slower clinical trial setup times, weakening its ability to develop and produce new drugs early, in addition to less favorable regulatory and funding environments, and smaller patient pools compared to the U.S. and China.”

According to Atraduis, 2025-2030 compound annual growth rates for pharma investments in China are expected to be 4.5%, with the U.S. coming in at 3% while the EU and UK have a forecast of 2.2%, respectively.

When it comes to contract development and manufacturing organizations (CDMOs), Hamzic contends the current business environment “favors flexible, multi-region capabilities, as sponsors prioritize resilience and optionality over single-market concentration.”

Pharmaceuticals production in the Eurozone — the group of 20 EU countries that use the euro as their official currency — jumped 21.6% in 2025, according to Atradius, due to “front-loading triggered by massive U.S. tariff threats.” In 2026, Eurozone’s pharma output is expected to contract temporarily by 3.7%, the report projects.

On the positive side of the ledger, Atradius sees the demand outlook for pharmaceuticals in Europe as “solid” in the mid- and long-term due to the region’s aging population and need for products to treat chronic diseases.