The inflation rate may have fallen from October 2022’s all-time high, but the UK pharma industry is still reeling from its effects. Alongside supply chain shocks and growing global competition, companies are continuing to face high prices and a costly war for talent. And despite the Bank of England predicting that inflation will fall from Dec 2023 rate of 4.0% through 2024, it’s likely to remain the highest of the G7 nations.
Even before inflation skyrocketed in 2021, tripling the cost of raw materials and doubling energy costs, the UK pharma sector was facing a major challenge. Between 2010 and 2020, we exported fewer pharmaceutical products than other countries, falling from 5th to 98th in the overall trade balance. Tax breaks elsewhere and high rebate rates here, combined with Brexit uncertainties, put investment at risk.
In tough times, the healthcare and life sciences sector often fares better as buyers prioritise health over other spending. CPI data shows that prices for pharmaceutical products have risen steadily since 2007. The issue is that costs have jumped too. So while governments and consumers may be willing to pay more for patented and generic drugs, it doesn’t always translate into profits.
On top of managing higher prices in their supply chains, the UK’s pharma businesses are also racing to innovate. Patents are expiring, which means successful product development holds the key to commercial success. They need labs, factories and corporate offices to be running seamlessly at all times. And for that, they need the best people.
Between April and October 2023, ONS data shows that annual growth in private sector earnings, excluding bonuses, was running at 7.6%. Even before that, Brexit, long-term illness and pandemic-influenced career changes had shrunk the labour force and driven up salaries.
However, despite higher salaries, the pharmaceutical industry is still finding it difficult to recruit, particularly in R&D. High salaries and big-brand names are no longer enough. Companies are increasingly having to complete on experience and enjoyment to secure top talent. And crafting a workplace requires understanding the expectations of the modern pharma workforce.
Our Worklife Experience Tracker, conducted in partnership with YouGov, asked 3,000 people in the UK how they felt about their jobs. Among pharma sector respondents, there were some areas for improvement. Wellbeing, for example, was a concern, with 1 in 20 reporting poor mental and physical health. Nearly 1 in 5 are also ‘quiet quitting’ by doing the bare minimum.
There were some positives too, which pharma companies can build on to counter the impact of inflation of their bottom line. The majority of people have found balance, with 63% happy with their working patterns. Most promisingly, both pharma employees and their employers see real value in social interaction.
Our pharma clients are encouraging people back into the workplace as much as they can. They fear the negative impact of remote working on creativity and innovation. And employees feel it too. Our research showed that seeing co-workers was one of the top five reasons they’d travel into the office if they didn’t have.
Other reasons included a comfortable environment and subsidised travel and food. Inflation has, of course, increased the cost of living and impacted employees’ own quality of life, which means industry leaders are investing in in-office benefits. For R&D hubs in particular, we’re seeing more of our clients elevate their food offers, opting for contemporary, sustainable dining served in spaces that encourage connection.
We’re also helping our clients to identify efficiencies so they can focus resources on product development. In manufacturing, for example, we’ve switched to autonomous gyms on some sites and adjusted the food offer, offering well-balanced but high-fuel dishes through Kitchen Works Co, our food brand designed for Pharma manufacturing environment. And, naturally, we continue to uphold the highest standards in the cleaning and maintenance of cleanrooms.
For corporate offices, we’ve flexed our working practices to match occupancy levels, enabling clients to manage their estate differently. For one client, this change is expected to save them £80,000 annually on cleaning, food and energy costs. We’re also enabling an agile approach that meets employee expectations yet minimises the office footprint. For example, our signature office food offer, Modern Recipe, bringing together the ingredients that feed our best selves: Food that’s in tune with our bodies and our planet, spaces that bring us together and keep our day flowing It connects to an AI-powered app, Everyday, to enable digital ordering too. Realising these efficiencies while sustaining an exceptional experience relies on actionable insight.
To control costs and meet consumers’ growing interest in provenance, we use a centralised menu management system that makes the most of seasonal ingredients.
Our 4sight system also brings consumer data to life, tracking things like footfall, dwell time, payment data, calories and carbon emissions, enabling ongoing improvements in the food offer. By the end of 2024, we expect to be collecting 250 million data points per month, giving our clients the insight they need to make the right decisions.
Sharing this information with employees can help to boost engagement too. Our Worklife Experience Tracker showed that 80% of the pharma workforce felt sustainability was important, with 53% expecting their employer to demonstrate responsible waste management. Reducing food waste is particularly beneficial as it can have a major impact on both carbon emissions and cost; you can find out how much of an impact in our new guide.
Despite the ongoing inflationary pressure, UK pharma revenues are expected to show a compound annual growth rate of 5.8% between 2023 and 2028. And in November 2023, the UK government announced additional R&D funding for the sector that was welcomed by the industry. But the race for innovation remains on. We believe it will be won in the workplace.