17 basic questions on industrial strategy answered (if you were afraid to ask)

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For the last three months the government has been consulting on its industrial strategy green paper. Just before the Easter break EEF submitted our response to this process. The document pulls together the combined expertise from across our policy team and is based on what must be hundreds of conversations with manufacturers about their ambitions for the future and what industrial strategy means to them. 

Here I try and boil down the green paper and our response to in it 17 frequently asked questions.

1. This isn’t the first go at industrial strategy we’ve seen in the UK. How many are we up to?

Greg Clark is the third Business Secretary in the past decade to preside over an industrial strategy (re)launch.  It began with the then Trade and Industry Secretary, Peter Mandelson, promoting industrial strategy on the basis of the UK needing “more engineers and less financial engineering.” This was a brief hiatus after the 2010 General Election, before Vince Cable also threw the weight of his department behind a mainly sectoral approach to industrial strategy.

The creation of a new government department for industrial strategy and the backing of the PM means this could be third time lucky

2. Everyone wants to know – will this one be different?

The basic intent is the same – the UK economy is unbalanced and we are not as productive as our G7 competitors – government needs to do something different for this to change.

But in other respects there are differences – the government is consulting on its approach, it’s been championed by the PM, rather than being the product of the Business Department and it’s focused more on cross-cutting policies to support growth and productivity rather than relying on a small number of sectors to do the heavy lifting.

3. Have we learned anything from previous efforts?

Not that anyone is admitting to. But my read out would be that government’s previous efforts to lead the creation of sector organisations when there is limited cash will only ever be partially successful. This is especially true if there are major weak points in our skills development, physical infrastructure and approach to procurement or if the cost of doing business in the UK is uncompetitive. 

Critically, industrial strategy a document outlining a few dozen policy ideas in support of the private sector, but a long term and coherent cross government approach to enabling stronger growth, more investment and better jobs.

4. Can we just lift one from somewhere else?

Probably not. Germany, South Korea, China – whatever your example of best practice is – have been honing their approach to industry for decades. Strategies have evolved in line with shifts in globalisation or technological advances, for example. The UK needs its own process – one which recognises the structure of industries and supply chains and understands how government can best enable these to compete, invest and grow in the UK.

5. Brexit ups the ante on industrial strategy this time surely?

Of course it does.  Although, at EEF we’ve been writing about this for more than a decade. But the inevitably uncertainty created by the negotiation process demands a domestic policy response that makes the UK a more stable and predictable base for investment in people, production and new ideas – all central to raising our productivity game and bringing about more balanced growth.

6. Isn’t the weaker pound helping the rebalancing process get underway?

The exchange rate is indeed helping to do some of the work.  As is a general pick up in the global economy, which is driving up sales and underpinning a pick-up in investment intentions. But this might be short-lived. And in case it is, a joined up strategy from government to promote investment and productivity growth seems like a sensible insurance policy.

7. What really matters to manufacturers?

Firstly, what are manufacturers’ ambitions?  In short, our research shows that they want to grow, be more productive and competitive, bring new products and services to their customers and crack on with investments in new technologies.

Industrial strategy isn’t about government doing this for industry, but being clear that it shares many of these goals and that individual departments will go about their procurement or investment or regulatory business in support of those goals. Thus making the UK business environment not only more support for UK manufacturers, but also more predictable.

8. Does the green paper deliver on this?

Right, back to the government’s initial proposals announced in January. The green paper gets some, but not all of the way there.  It outlines the UK’s economic challenges, commits to taking a long-term approach to delivering sustainable growth, but fall shorts in setting clear measurable goals that all government departments can collectively work towards.  

9. What does the green paper focus on then?

Much of the 132 pages is devoted to the policy detail. There are 10 policy pillars that will be the main focus of industrial strategy. And as think the cross-cutting policy ‘pillars’ in the green paper are broadly right.

10. Are these policy pillars the right ones for government to focus on?

Skills, infrastructure, energy and innovation – all areas over which government can exert influence to shape outcomes for the private sector. There are no surprises, but nothing major missing. There is more detail and resource in some pillars than others.  Science and innovation feels comprehensive and builds on success of existing schemes and the infrastructure pillar is a reminder of progress made on improving decision making on big projects. On energy, there is more detail needed on who will benefit from lower costs and more focus on the transition to a low carbon economy; and on skills manufacturers want more detail on how they can work with education providers and shape curricula.

11. So, there’s still some policy fleshing out needed for the white paper?

Yes, but this needn’t be a big concern now – it’s more important government gets the framework right from the start and the policy detail will evolve.

Building a strategy that offers businesses certainty and predictability about policy decisions is a top priority from the outset. A clear sense of direction and all new announcements falling under the 10 pillars from the outset are critical in embedding the strategy and building confidence in it. Inevitably the policy detail will develop over time.

12. How much new cash will this require?

A lot. But in time. The autumn statement saw the Chancellor announce a £23bn National Productivity Investment Fund targeting science, innovation, housing and infrastructure. Subsequent statements need to keep the focus on these policy areas, even when it might be politically tempting to splash the cash elsewhere. 

13. What about the whole picking winners thing – is that over?

There remains a sectoral component to the strategy, but this is less dominant and more industry driven than previously.

Sector deals – along the lines of previous place based deals – are the new mechanism for removing barriers to success for particular sectors, supply chains or clusters. These will look different from past sector councils in that the private sector will need to organise itself, be clear about shared ambitions and the action government can take to enable success. 

14. What does this mean for Sector councils, is it just about sector deals now?

There’s no reason why long-standing sector councils will be going anywhere. But not all sector deals should require a ‘council’ set up. When we get to the white paper (or even before that) we could do with a bit more structure from government to bring about good ‘deals’ that make a genuine difference to the fortunes of sectors.

More guidance is needed on the process for agreeing a deal, governance arrangements and timescales. Clarity on these will improve the chances of successful outcomes for sectors and clusters.

15. So that’s the horizontal and the vertical policy covered.  Where does place fit in?

There is a strong place dimension in the green paper. Action that is already underway to devolve power and funding to local areas, create Combined Authorities and elect mayors is the basis of better sub-national decision making on priorities such as infrastructure and planning. We should continue with this process; there isn’t a need for new institutions to deliver strategy outcomes.

16. What does industry want to see happen now?

Let’s do this. Industry and government want many of the same outcomes. So let’s have government firm up their industrial strategy objectives, start disbursing the Industrial Strategy Challenge Fund, press ahead with critical infrastructure investment, set out the parameters for good sector deals and more (see our response for the rest).

17. What if there’s a general election? Does that mean we’re headed for industrial strategy 4.0?

That’s not likely.  Hold on Breaking News….

 

 

 

Author

Chief Economist

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