American pharmaceutical giant MSD is scrapping the planned £1bn expansion of its operations in the UK saying the government is not investing enough in the sector.

The multinational business, known as Merck in the US, said it would move its life sciences research to the US and cut more than 100 UK jobs, blaming successive governments for undervaluing innovative medicines.

A spokesperson for the government defended its investments in science and research, but acknowledged there was “more work to do”.

Pharmaceutical companies have been refocusing on American investments following pressure from US President Donald Trump, including threats of sky-high tariffs on drug imports.

MSD had already begun construction on its site in London’s King’s Cross which was due to be completed by 2027, but said it no longer planned to occupy it.

The company will also vacate its laboratories in the London Bioscience Innovation Centre and the Francis Crick Institute by the end of the year, which will lead to 125 job losses.

A spokesperson for the drug company said the decision “reflects the challenges of the UK not making meaningful progress towards addressing the lack of investment in the life science industry and the overall undervaluation of innovative medicines and vaccines by successive UK Governments”.

MSD is the latest pharmaceutical company to abandon or reduce investment plans in the UK.

In January, AstraZeneca walked away from plans to invest £450m in expanding a vaccine manufacturing plant in Merseyside earlier this year, blaming reduced government support.

The UK boss of another pharmaceutical giant warned last month that NHS patients would lose access to cutting-edged treatments because Britain was “largely uninvestable”.

Norvartis’s Johan Kahlstrom said the company had “already been unable to launch several medicines” in the country due to the “declining competitiveness” of the UK market.

Industry sources told the BBC the industry had been attracting major funding in the hub around Kings Cross focused on the intersection between life sciences and AI.

They pushed back on claims that the decision was linked to ongoing negotiations over drug prices, in which industry has been lobbying hard for the NHS to approve more and pay more for medicines.

The current pricing regime was set and agreed to by drug companies in 2023 – less than 18 months ago.

Since then, drug companies have come under pressure from the Trump administration to lower drug prices for US customers and to invest more in the US – affecting their ability to invest elsewhere.

In an August interview with CNBC, Trump suggested that tariffs on pharmaceuticals imported to the US could reach up to 250%.

The threat followed an executive order signed by the president in May aimed at reducing drug prices for American consumers.

Dr David Roblin, chief executive of London-based biotechnology company Relation Therapeutics, told the BBC that the fundamentals that drove MSD to invest in the UK in the first place had not changed.

“The academic environment in the UK continues to produce innovative ideas and people to run with those ideas, which attracts foreign investment,” he said.

“The environment to do research is still outstanding: we’ve got great academics, the NHS does provide a research platform, for example the UK Biobank is proving to be a real attractor for companies like mine,” he said.

What has changed, Dr Roblin said, was the political landscape in the US which big pharma has to respond to, “because the US remains the largest market for pharmaceuticals on earth,” he added.

A spokesperson for the Department of Industry, Science and Technology said the government was driving investment and growth in the sector through its life sciences sector plan.

“The UK has become the most attractive place to invest in the world, but we know there is more work to do,” the spokesperson said.

“We have already started delivering on this work from investing up to £600 million in the Health Data Research Service alongside Wellcome, through to committing up to £520m to the Life Sciences Innovative Manufacturing Fund, unlocking billions in private investment.”

“We recognise that this will be concerning news for MSD employees and the Government stands ready to support those affected.”