Industrial strategy according to EEF

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There’s a buzz of excitement in the air. The long-awaited green paper on industrial strategy is due to land early next week. Working closely with manufacturers, we’ve been championing the cause of industrial strategy for .. well … a pretty long time now. And while the arguments for the government actually adopting it are now broadly (though not universally) accepted, the question now is what does an ambitious industrial strategy look like for the UK, particularly in the context of Brexit?

EEF has variously written about our hopes and dreams for an industrial strategy here, here and here (this one is about place too) etc… But to save you some time, here’s a quick reminder.

It has to be a strategy

Start with the obvious. A strategy is more than a list of crowd pleasing actions or an aggregation of things that government is already doing.

A strategy should set in train a course of action in order to deal with a particular problem or to achieve a specified outcome. In theory, it’s possible to tell if the strategy is any good as it’s possible to measure whether progress is being made on the desired outcomes.

An industrial strategy in practice, therefore, needs to decide which are the most important economic problems the country needs to tackle (there is plenty of choice). And be clear about what success would look like. Our two-cents worth is that closing the productivity gap with G7 competitors; generating sustained, positive contributions to growth from net trade and moving the UK into the position of innovation leader rather than follower should form the ambitions of an new industrial strategy.

It should align with what industry is striving for

Our top three priorities aren’t arbitrary. At the macro-economic level our woeful productivity performance is well documented, but talking about it hasn’t moved the dial. And for manufacturers, the requirement to raise productivity is well understood and it an important part of their strategies in the coming years.  

The drag on growth from net trade has been persistent in spite of the accepted need to rebalance growth towards more exports and investment and reduce our reliance on household spending. For manufacturers the hunt for new overseas customers will continue this year, but it is regarded as one of the most challenging business priorities to deliver - as we showed in our 2017 Executive Survey.

"Innovation is everything. When you're on the forefront, you can see what the next innovation needs to be. When you're behind, you have to spend your energy catching up."  Robert Noyce          

 

That’s what we’re currently doing, against despite manufacturers placing ever greater emphasis (and resource) on increased innovation. If we don’t change the game in the UK, we’ll miss out on the big benefits of the fourth industrial revolution.

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Equally, businesses must be clear on what this means for them

Manufacturers – and businesses across many other parts of the economy – have been calling for an industrial strategy because it has the potential to offer more of a guarantee about the direction of future policy decisions. This predictability offers more confidence when making decisions about investment in the UK. This should also start to see government reflecting the long-term nature of business decision making and reacting less to events.

It’s  strategy for all of government

There is a big caveat though predictability only comes if all parts of government are in for the ride. Positive actions to support innovation and productivity from one department can so quickly be undone by a different set of objectives being pursued in some other part of government, say the Home Office, or the Treasury.  

A properly functioning industrial strategy means that no business group press release can ever again say that government is robbing Peter to pay Paul and other such clichés.

There must be an early action plan and a sense of longevity

So I’ve talked about the what and the why, but obviously the most important bit is the how. We’ve grouped these under four headings –deliver a more skilled and flexible workforce; improve the resilience and reliability of our infrastructure; reduce the cost of business in the UK and provide better support for businesses that want to growth.

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We heard some positive policy priorities under some of these headings from the Chancellor at the Autumn statement – more cash for R&D; investment in digital infrastructure and a review of the R&D tax credit.

A sign that industrial strategy has really taken root this time is that the focus on these areas is not just for this year, or for this parliament. Instead, these will remain important areas for government action until it is confident that is has delivered. And, of course, we will know that this is the case because, at last, success will be measurable.

 

We'll be blogging about the detail of the strategy and what we think about it next week.

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Chief Economist

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