We had a bit of positive manufacturing news last week as output rebounded by over 3% in July, following June's Jubilee-related slump. But talking to our members the view from many, at the moment at least, is that conditions for growth are set to be challenging over the next six months.
This not only makes the outlook for our economy pretty uncertain, but given the export-focused and capital-intensive nature of the sector, progress towards better balanced growth continues to look like an uphill struggle.
Where growth is going to come from is pretty high on the agenda. Last week the coalition returned from recess with a new energy (and new Minsters) to lead the charge on getting the economy moving again. We've had announcements on infrastructure, planning reforms, with more likely over the coming week.
There has been a lot to welcome, but there's still something missing. And in our new report, published today, we set out how a modern industrial strategy can plug the gap in the government's economic policy.
We need a different approach from government; one that brings the same clarity to growth as the government has already outlined on reducing the deficit. There are three crucial strands to this:
- A clear vision of the kind of better-balanced economy the government is trying to create and an economy-wide industrial strategy for delivering it.
- A cross-government commitment and approach to work relentlessly to deliver that vision
- Measurable benchmarks and an accountability framework that holds all parts of government accountable for progress
A vision for better-balanced growth must be simple and speak to the widest possible group of businesses that are aiming to grow by investing and exporting. It must give them a compelling reason to do it in the UK.As part of economic rebalancing we will see progress on the following within the next five years:
1. More companies bringing products and services to market
2. A lower cost of doing business in the UK
3. More globally focused companies expanding in the UK e.g. the number of companies with 25% or more of turnover coming from exports will increase
4. A more productive and flexible labour market e.g. 25% increase in level 3 STEM apprentices
Everything government does needs to map back to these ambitions for our economy. It must be clear to businesses that all parts of government have bought into and are committed to delivering better-balanced growth.
Too often we're heard past positive, pro-growth policies announced, but at the same time, other parts of government have been singing from a very different hymn-sheet.
A clear vision should set the direction for all government action, but this needs to be supported by decision-making structures that are fit for purpose, including close cooperation across government departments and the creation of a new Cabinet Committee for Growth jointly chaired by the Prime Minister and Deputy Prime Minister.
There must be clear lines of accountability to ensure that growth and rebalancing remain on track. If progress towards deficit reduction drifts, the Chancellor must set out – in Parliament – what action it will take in response.
A similar responsibility for growth must flow from the highest levels of the Cabinet. And success on the rate of progress on a small number of measurable benchmarks should be monitored by the National Audit Office and communicated to Parliament alongside Budget and Autumn Statements.
Actions for today
This strategy provides a framework for what we want our economy to look like, we also need to focus on how we get there; starting with;
- Getting growth capital to the supply chain
- Cost-effective focus on energy reforms, including a commitment to a technology-neutral approach from 2020 to address business concerns of open-ended subsidies to uncompetitive energy sources.
- Cutting the burden of employment regulation, by accelerating progress on reform to Employment Tribunals, collective redundancies and TUPE, ensuring that most tribunal claimants pay some upfront fees, scrapping proposals to introduce pay audits and abolishing fines for employers that lose tribunals.
- Investing in modern infrastructure and reprioritising spending where private sources for infrastructure projects remain a problem
- Reforming funding for apprenticeships to ensure that resources are targeted at employers who provide longer apprenticeships and greater opportunities for higher levels of attainment.
An industrial strategy needs to endure beyond the latest political fad or any one political party. All our politicians to recognise the value of having a clear vision, gearing the whole of government to delivering that vision, and setting clear accountability arrangements. Our challenge is to define industrial strategy in terms of the overall economy we all want.