Lines open Mon-Fri 08:30-19:00

Government’s industrial strategy – a step forward but not yet a step-change?

Government’s industrial strategy – a step forward but not yet a step-change?

Westminster signpost and Big Ben

Since her leadership campaign in July the Prime Minister has pointed to a “proper industrial strategy” as a key means of advancing her declared ambition for “a country that works for everyone”, as well as preparing Britain to prosper outside the European Union. Its development has been led by Greg Clark at the new Department for Business, Energy and Industrial Strategy (BEIS) and was originally expected in the autumn.

A Green Paper finally appeared on 23 January. In broad terms, Building Our Industrial Strategy covers similar ground to approaches argued for by Peter Mandelson at the end of the last Labour government, Vince Cable and Michael Heseltine during the Coalition period, and even in George Osborne’s “productivity plan” of 2015 (although the language of “active industrial strategy” seemed at that time to fall out of disfavour).

The new document takes up similar themes, identifying ten “pillars” of the strategy:

  • science, research and innovation
  • skills
  • infrastructure
  • business growth and investment
  • procurement
  • trade and investment
  • affordable energy
  • sectoral policies
  • “driving growth across the whole country”
  • “creating the right institutions to bring together sectors and places”

New emphases

As is often the case with such exercises, the document is stronger on analysis and aspiration than concrete actions – much of the latter consisting of recycled and repackaged announcements and initiatives from recent months. These include the new investment in infrastructure and R&D promised in November’s Autumn Statement, and reforms to technical education proposed in last April’s Sainsbury Review.

New-ish areas of emphasis that I expect most people in Prospect would welcome include:

  • the recognition that productivity is about working “smarter” not “harder”, in line with Prospect’s recent work with the Smith Institute;
  • the stress laid on improving STEM skills, including through non-graduate routes;
  • the limited support for considering “social and economic factors” in public procurement decisions; 
  • the value of sectoral institutions such as those developed in the automotive and aerospace sectors; and
  • a strong “place-based” dimension aimed at spreading investment and high quality jobs more evenly around the country.

Old limitations

More disappointing, if not surprising, is the document’s lack of anything to say about workforce engagement and involvement, let alone trade unions (who might have a valuable role to play in the sectoral institutions it proposes).

Also familiar but arguably limiting is the commitment to an economic model centred on “pro-competition rules, flexible labour markets, less intrusive regulation and a favourable taxation regime” (which the Government is now threatening to double-down on if it fails to get a decent deal on access to the European Single Market).

But probably the biggest question hanging over this, as over previous strategies, is whether the Government is ready to commit the resources, devolve the powers, and exercise the leadership on a scale needed to make this more than just a change of tone and actually deliver the economic rebalancing and real improvements in productivity and opportunities that everybody recognises the need for.

For example, the strategy relies on the initiative of industries coordinating themselves to develop strategies and propose deals with government on issues of common concern, and the strength and legitimacy of Local Enterprise Partnerships, Mayoral authorities and financially squeezed local authorities to build strategies that meet the needs of particular areas.

But the results of this approach are likely to be patchy and risk reinforcing imbalances more than correcting them if the Government is not ready to take more of a strategic overview and lead. This morning’s Financial Times complains that the document already goes too far in this direction, while for The Guardian it doesn’t go nearly far enough.

Resources

On the question of resources, there are numerous tensions between the strategy’s aims and the ongoing context of fiscal austerity. For example, the £170m promised for technical education has to be seen in the context of a severe funding crisis in further education, as the University and College Union and the BBC’s Chris Cook have highlighted.

Meanwhile as Nesta, the innovation foundation, has often pointed out, Innovate UK, the BEIS agency that aims to support the conversion of Britain’s research strengths into commercial applications through its network of Catapult centres, commands a fraction of the resources available to comparable institutions such as Finland’s Tekes, Germany’s Fraunhofer Institutes, or France’s Instituts de Recherche Technologique.

The new investments announced in the Autumn Statement, readvertised by the Green Paper, were surely welcome but will still leave public investment falling as a share of GDP over the rest of the Parliament and total R&D expenditure still well short of what would be needed match EU or OECD averages.

And getting all of this right will of course depend on the work of skilled specialists, professionals and managers in the civil service, its agencies, arms-length bodies, and associated research centres. But the business department has had its core staff cut by 22% since 2010, and reports that its

“Partner Organisations have cited the two-year pay freeze and subsequent 1 per cent pay cap as causing problems to business delivery, particularly in specialist areas, such as science, engineering and IT”.

Issues for Prospect sectors and organisations

The document contains a number of specific ideas and announcements that could have a direct impact on some Prospect members, including:

  • a review of incentives in the intellectual property system and a promise to place Intellectual Property Office representatives in key cities to “build local capability to commercialise intellectual property”
  • a new UK measurement strategy, which will presumably involve the National Measurement Office and National Physical Laboratory
  • a commitment to take more of a lead in identifying acute and urgent skills shortages in key industrial sectors such as those acknowledged in infrastructure and the nuclear industry
  • a focus on the defence sector as one in which Government has a “unique opportunity to drive improved outcomes” through procurement
  • a review aimed at cutting the costs of carbon reduction for businesses and households that  could well lead to reductions in subsidies for solar farms and offshore wind energy
  • moves towards convening businesses to design “sectoral deals” in key industries including life sciences (led by Sir John Bell), nuclear (led by Lord Hutton) and creative industries (though only video games and music are mentioned – led by Sir Peter Bazalgette)
  • a  review of the location of government agencies and arms-length bodies as well as public cultural institutions with a view to “relocating them where they could potentially help reinforce a local cluster and support private sector growth”
  • a review of “whether there is more that can be done to leverage government and research council laboratories to drive local growth”

Prospect will of course be looking closely at the implications of all these ideas and initiatives – we’d welcome reactions and suggestions from members and those with relevant expertise.

Please send them to research@prospect.org.uk.

Martin McIvor

Martin McIvor


Comments

There are currently no comments on this post.

You cannot currently add comments, please log in to add a comment.