This Government’s flagship domestic policy, the much-anticipated industrial strategy, was published yesterday. Given the scale of its ambition – to boost productivity and spread the benefits of growth across the country – it is unsurprising that it is a lengthy document, with ten ‘pillars’ explored across 132 pages. It is also a considered document, much of it very welcome, and is helpfully now out to consultation for the next 12 weeks. We’ll be doing a great deal of more detailed work on the industrial strategy over that time, but here are five immediate reflections on what we know about the plans so far, and what the coming White Paper will need to do:
Innovation must continue to be at the heart of the strategy – but ‘place’ should be the framework on which the strategy is organised and delivered.
The Green Paper rightly puts innovation as pillar one. It is only through innovation – whether transformational technologies like the internet of things or incremental innovations in team-working in local firms – that the UK will improve its productivity. But the focus of innovation is currently on science and R&D, and needs to be intertwined with thinking on institutions and places (pillars 9 and 10). Places are where innovation eco-systems exist, bringing together people, ideas and institutions. They can help foster the emergence of new businesses, many of which will cut across existing sector lines. Ultimately it is not only the specific policies that the industrial strategy introduces, but the way in which they combine that will matter, and this is most easily done within places. While it is a more place-based strategy than its predecessors, place should be the framework on which the various pillars are delivered and developed, rather than an individual component of the strategy.
Having institutions that bring together sectors and places will be vital to economic growth across the country – the next stage of the strategy needs to do more to ensure SW1 is not dominating decisions.
City region mayors will be crucial; it is encouraging to see recognition of this and Government welcoming further strengthening of existing devolution deals, although more detail is needed on their role in determining spending of central pots such as the Productivity Fund. Identifying where other institutions may need to be strengthened, supported or built is also welcome, particularly in some of the places with the weakest economies. But for the strategy to work, more detail is needed on who makes funding decisions and how innovation, growth and shared prosperity will be supported at local levels. Government needs to genuinely empower partners in the public, private and third sectors to take a lead, and it needs to ensure that any institutions it supports – whether new or existing – are clear what their purpose is and that they will be supported for the long haul.
Sector Deals were inevitable but doing deals with a small number of industries raises questions about policy detail, geography and cross-sector innovation that the White Paper will need to answer.
It’s good to see cross-cutting sectors such as creative industries and national strengths such as life sciences recognised as important. But the sector deals will need to be very clear why the Government intervention required is sector-specific rather than more generic. The focus on five sectors also raises geographical challenges – they are all relatively concentrated sectors, meaning much of the country will miss out on sector deals. Finally, in a fluid world in which Standard Industrial Classification codes are already struggling to keep up with business changes, there are questions about how government works out which businesses are in the deals and which are not. Hugely important value added work and innovation occurs in the interplay between sectors, for example between tech and creative firms. Government will need to manage the risk that sector deals could at best fail to capitalise on this, and at worst inadvertently disincentivise this cross-sector interaction.
Growth will not be shared automatically and the strategy will need to be clear about the choices it is making.
Supporting highly productive, knowledge intensive industries will boost overall economic growth and productivity, as well as create some less knowledge intensive jobs. But there is no automatic spill-over to neighbouring areas and people. Investment in skills and infrastructure will be critical components of ensuring wider benefits of economic growth. But – as the Green Paper suggests – investment in (for example) local transport infrastructure to ensure growth is shared across the UK may require investing in areas that will not grow as rapidly and will show a lower return on investment than transport in, for example, the South East. The strategy will need to be clear that it can pursue both ambitions, but few projects will be able to achieve both goals – it will require different investments in different places.
A successful strategy will need to pull often disparate policies together and have a clear plan for implementation – and, again, place should be a bigger part of the solution.
In an era of limited funds, one of the temptations facing the industrial strategy could be to rebadge a lot of existing policies rather than introduce new policies that cost money or to rethink investments. As the Green Paper develops into a White Paper, it will be important for the Department for Business, Energy and Industrial Strategy and No 10 to ensure that they are genuinely pulling together the different government departments. Strategies on skills, infrastructure, housing, innovation etc need to work together rather than pulling against one another – and the most effective, efficient and easiest way to do this is in places, particularly with the mayors. Place should be seen as a crucial way in which different policies can be combined to support innovation and skills in all sectors, current and future. If the strategy is to deliver results, working with city regions as well as employers, universities and other business organisations will be vital.
Expectations of this modern industrial strategy are high in a post Brexit era. Delivery will require the Government to resist siren calls to focus only on high profile sectors or building shiny new infrastructure projects. Long term success will require a long term approach to boosting the drivers of economic growth across the country, making the most of places’ different strengths and their ability to bring people, ideas and innovation together. As the Green Paper develops, this will require building on many of the helpful existing proposals to ensure innovation, place and skills are intertwined at the heart of this strategy for growth.
We’ll be doing more on these issues, looking at how best to support different city economies, how Government can learn from past mistakes and focusing specifically on how Government might support some of the areas with struggling economies – watch this space for more developments in the coming months.