GSK to boost jobs in fragile British economy

* Pharma firm will add more UK jobs in next 7-10 years

* Says increasing activity to take advantage of tax changes

By Paul Sandle

LONDON, July 26 (Reuters) - Drugmaker GlaxoSmithKline said on Tuesday it would bring more jobs to Britain, taking advantage of tax changes and delivering good news in an economy where recovery remains fragile.

"We expect over the next several years to be increasing our activity in the UK," Chief Executive Andrew Witty told reporters after the group released its second-quarter earnings on Tuesday.

"I would fully expect us to have a more substantial degree of activity, and therefore have greater potential to pay tax, in the UK, not least because things like the patent box and the reduction in corporation tax have started to make the UK more attractive."

The government is reducing the level of corporation tax applied to income from patents, called a patent box, from 2013 to boost high-value jobs and activity associated with innovation.

GSK's vote of confidence will be welcomed by government ministers, who are struggling to boost growth. The country's economy barely grew between April and June and industrial output shrank.

It also comes after Britain's scientific jobs base was dealt a major blow in February when Pfizer, the world's biggest drugmaker, said it would close its research and development centre in Sandwich in southern England.

Witty said GSK had already started to bring manufacturing activities that had been off-shored to India back to the UK, and a new factory located in either Cumbria, County Durham or Scotland would employ an additional 500 people.

"Over the next several years we will be a job creator in the UK overall," he said.

However, Witty said any further cuts to drug prices could make the UK less attractive as a base for pharmaceuticals manufacturing and research.

"There's a real balance to be struck between having competitive prices for the medicines and also ensuring there is an underpinning of the innovation industry and the research that goes on in this sector, and that's where the UK has a tremendous amount to gain," he said.

"I think the UK has that balance pretty well at the moment." (Editing by David Cowell)