* Government says decision a clear vote of confidence in UK
* Investment at sites making respiratory and biotech drugs
* GSK Q2 sales and core earnings beat expectations
* Weak pound could boost 2016 earnings by 19 percent (Adds Q2 earnings, further CEO and analyst comment, latestshares)
By Ben Hirschler
LONDON, July 27 (Reuters) - GlaxoSmithKline plans275 million pounds ($361 million) of new investments at threedrug manufacturing sites in Britain, signalling its confidencein the country despite last month's vote to leave the EuropeanUnion.
The decision came as Britain's biggest drugmaker reportedbetter-than-expected quarterly earnings on Wednesday, buoyed bynew drug sales and currency gains from a falling pound, which itsaid could pump up full-year results by 19 percent.
GSK, which had argued against Brexit before the referendum,said the UK remained an attractive place for making medicines,thanks to a skilled workforce and relatively low tax rates.
The country's so-called patent box boosts profits frompatented innovations by halving the rate of corporation tax.This tax relief, which favours pharmaceutical companies, hascome under fire in recent days from the opposition Labour Party.
GSK is investing in sites at Barnard Castle, in the north ofEngland, Montrose, in Scotland, and Ware, north of London, toincrease production of next-generation respiratory drugs andbiotech medicines.
The vast majority of these products will be exported.
"It is testament to our skilled UK workforce and thecountry's leading position in life sciences that we are makingthese investments in advanced manufacturing here," said ChiefExecutive Andrew Witty.
Business minister Greg Clark said GSK's move was a clearvote of confidence in Britain and demonstrated that "therereally is no place better in Europe to grow a business".
Witty, who is retiring next year, said Brexit could disruptEurope's unified system for drug regulation and potentiallyhamper access to top scientific talent, but this was not enoughto offset Britain's fundamental competitiveness.
HELPED BY STERLING FALL
Britain accounts for nearly half of GSK's worldwide researchand development and around a third of its manufacturing.
Uncertainty surrounding the vote to leave the EU in lastmonth's referendum has raised fears over corporate investment inBritain, which some economists fear could exacerbate difficulttimes ahead as the government negotiates future trade relations.
GSK's substantial investment therefore gives somereassurance and follows signs that foreign buyers, lured by aplunge in the pound, are looking to snap up bargains in Britain,led by Japanese group SoftBank's $32 billion swoop forchip designer ARM Holdings.
The board of French utility EDF, meanwhile, willmeet on July 28 to consider a final investment decision on its$24 billion Hinkley Point C nuclear project in Britain.
The pharmaceuticals industry is a notable success story forBritain, directly employing more than 70,000 people andaccounting for 25 percent of all business research anddevelopment spending.
RECOVERY PHASE
Witty has been under pressure since 2013 as profits haveflagged and some investors have questioned his strategy, but hesaid he was "very positive" about handing over the company in astrong recovery phase when he retires next March.
GSK edged up its forecast for full-year core earnings pershare (EPS) growth at constant currencies to 11 to 12 percentfrom 10 to 12 percent seen previously, after second-quarter coreEPS of 24.5 pence soundly beat analyst forecasts of 21.0p.
Berenberg Bank analysts said the results were strong and thecurrency effect larger than expected, helping lift GSK shares byaround 2 percent.
The currency tailwind, however, complicates accounting forGSK's majority-owned consumer health and HIV businesses,resulting in a 1.8 billion pounds charge. This reflects the factthat these operations are now worth more in sterling terms andGSK is therefore liable to pay its partners more if they decideto sell out.
GSK said its new manufacturing investments would create somenew jobs but it did not give a number.
At Barnard Castle, it will spend 92 million pounds on asterile facility to make biotech drugs, while Montrose will get110 million for a new unit making lung drug ingredients, and 74million at Ware will expand production of its Ellipta inhaler. (Editing by David Holmes and Alexander Smith)
