International industrial policy experiences: What lessons for the UK?

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Our latest report in partnership with NatWest highlighted manufacturers' ambitions and outlined priority actions the government should include in its forthcoming industrial strategy. A sectoral approach is likely to be an element of industrial strategy though. In this regard, we look at sector-oriented industrial policies in some OECD countries and draw some lessons for the UK.

Since the onset of the global economic crisis, there has been an increasing interest for sector-specific interventions in some major developed countries. This shift occurred as the economic downturn has hit some sectors harder than others, threatening long term prospects in systemically important industries. As a result, these countries pursued a sector-specific approach in designing post-crisis industrial strategies aiming to redress investment and competitiveness in impaired industries and/or to develop opportunities in new sectors. These experiences provide guidelines and best practices for the UK’s forthcoming industrial strategy.

So what could we learn?

1. The “Why?”: Define specific goals, and be transparent about them

Taxpayers as well as businesses need to understand why the government is likely to promote some industries rather than others. Therefore, it is critical to set specific goals for any sector-based intervention and to communicate effectively about them.  

In the examples we looked at, we could easily identify the rationale behind sectoral approaches to industrial strategy. Some goals are specific to the manufacturing sector – promoting the emergence of new technology-based sectors, strengthening sectors of specialization, etc. – while others aim at responding to societal, economic or environmental challenges.

2. The “How?”: Identify selection criteria, and be consistent about their application

Along with defining clear goals, it is equally important to set criteria upon which sectors are selected for intervention, and to make them public.

The EU’s approach to identifying Key Enabling Technologies (KETs) is a good example. A communication from the EU Commission lists criteria for selecting targeted sectors under the current framework programme for research and innovation Horizon 2020. It notes that the programme aims at fostering sectors “that are […] associated with high R&D intensity, rapid innovation cycles, high capital expenditure and highly skilled employment” (COM 2012-341).

3. The “Who?”: Private sector should be involved

Manufacturers have a strategy for growth, and this should matter for the design of the forthcoming industrial strategy. It is thus important to align public intervention with manufacturers’ changing business models, supply chain relationships and strategy for investment and innovation.

Most examples listed below allow the private sector to have a say on sector-specific interventions. Whether this happens ex ante – with manufacturers involved in the selection process – or ex post – through sector councils or public-private partnerships, consultations with the private sector appear to be a common best practice worldwide. 

EU: Industrial Leadership - 2nd pillar of Horizon 2020

Targeted sectors

Selection

Criteria

Goals

Instruments

Key enabling technologies:

- nanotechnologies

- advanced manufacturing

- advanced materials

- biotechnology

 

EU Commission based on The High-level Expert Group on Key Enabling technologies' recommendations 

- High R&D intensity

- High capex

- High skills

- Rapid innovation cycles

- Systemic importance in the supply chain

* Enhancing innovation capabilities within manufacturing through:

- Building leadership in new sectors (nanotech)

- Upgrading production processes (adv. manuf.)

* Responding to societal challenges in areas such as: green energy, transport, health

Competitive grants

 

Public-Private Partnerships (PPP)

 

 

Netherlands: Top Sectors Initiative

Targeted sectors

Selection

Criteria

Goals

Instruments

- Horticulture and propagation materials

- Agriculture and food

- Water

- Life sciences and health

- Chemicals

- High tech

- Energy

- Logistics

- Creative industries

Chosen by the Dutch government, in consultation with the private sector

Strong economic sectors in terms of share of value-added, exports and business R&D

* Strengthening established comparative advantages

* Aligning different stakeholders’ strategies and growth policies in top sectors

* Responding to societal challenges

Public-Private Partnerships (PPP)

 

Sector councils

France: New Industrial France

Targeted sectors

Selection

Criteria

Goals

Instruments

- Advanced materials

- Sustainable cities

- Eco-mobility

- Eco-transport

- Health

- Big data

- Cybersecurity

- Intelligent food

- Factories of the future

Chosen by the French government, based on a report by the General Council for Industry (CGI)

- High growth markets

- High spill-over effects

- Established comparative advantage with internationally leading enterprises and strong innovation capabilities

* Encourage the emergence of new sectors based on breakthrough technologies

* Responding to societal challenges

Public-Private Partnerships

 

Competitive grants

 

Investment funds (PIA)

 

Training and skills

 

Japan: Industrial Structure Vision 2010

Targeted sectors

Selection

Criteria

Goals

Instruments

- Infrastructure-related and infrastructure system export

- Environment and Energy problem-solving industry

- Culture (fashion food, tourism)

- Health and child care

- Advanced areas traditional to Japan (robots, space, etc.)

Industrial Competitiveness Committee

- Regional demand-oriented industries (sectors with high income elasticity in Asia)

- High carbon productivity fields

- Areas where markets are expected to expand due to low birth rates and longevity

 

* Shift from a monopole structure based on automobiles and electronics to a stable multi-pole structure

* Shift from a high-functional, one-item selling industry to industries focused on system sales, business solutions and cultural value-added products

*Responding to societal challenges

Consortiums, PPPs

 

Financial assistance

 

Coordination

 

Diplomacy


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