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Local economic development strategies have been criticised in the past for being too generic and unrealistic: if you removed the place name, would you be able to discern where the strategy was written for, and how many places can claim to have a ‘specialism’ in the same sector?
These views have led to calls for distinctiveness to be a top priority in the local industrial strategies currently being developed. But what in practice should that mean? And how distinctive can we expect them to be?
To answer these questions, we first need to revisit the underlying aim of industrial strategies: to improve productivity by better-coordinating state intervention to support business growth. The idea is that local industrial strategies coordinate at the sub-national level, and the task for local partners is to prioritise interventions based on the characteristics of the local economy and barriers to growth.
The What Works Centre for Local Economic Growth is working with 11 local authority partners across the country to support them to make evidence-based decisions with regards to their industrial strategies. Through the course of our work with them, we’ve grappled with what local industrial strategies should look like and in what respects they should differ from the Strategic Economic Plans developed by LEPs. It’s clear that, as an evolving process and with no consensus among academics on these issues, nobody has all the answers as to what local industrial strategies should consist of.
With that context in mind, the case for making distinctiveness a central concern for local industrial strategies is unclear, for two key reasons.
Firstly, the nature of local economies and the challenges they face means that you would expect a degree of similarity between local strategies.
Given that many areas face similar issues and barriers to growth, the Government should not expect places to focus on a narrow set of distinctive challenges. For example, the underperformance of many of the UK’s cities is largely explained by skills. As such, for many areas, upskilling low skilled residents and improving school performance will be a priority in efforts to drive up levels of productivity.
Secondly, a national view of distinctiveness set by the Government – that requires different areas to focus on different sectors – is likely to mean that opportunities to support growth among the wider economy are missed.
Jobs and business activity in local economies – particularly urban ones – tend to be spread across a range of different sectors, and it’s quite often difficult to demonstrate the real comparative advantage in any specific one. Even if an area could demonstrate that it has a particular sectoral strength, it tells you nothing about the case for intervention.
Moreover, a local industrial strategy that focuses on specific sectors is unlikely to do much for the wider population or business base within a local economy. By contrast, cross-cutting (or horizontal) interventions, such as skills or transport policies, have the advantage that they span a wide range of sectors and directly target market failures.
Creating favourable conditions for businesses in places by focusing on the benefits and costs to agglomeration economies, as opposed to cluster policies, is more likely to support diversification and growth over the longer term.
But this doesn’t mean that all local industrial strategies should look the same.
Distinctiveness should be an outcome – not a goal – of well-formulated local industrial strategies. It may take the form of variation in policy mix and priorities: for example, cities in the South East are likely to need to focus more heavily on managing the costs of growth than their Northern counterparts. Or it may feature in more nuanced ways through the design and delivery of horizontal policies.
And here process, rather than policy, is important. In particular, it is crucial that places strike a fine balance between working closely with the private sector to develop a clear understanding of the barriers to growth and getting them to share the risk – without being captured by vested interests.
Equally important in order to have the maximum impact will be coordination across policy areas, and with the activities of other local institutions and organisations. Finally, if industrial strategies are about new ways of working and finding more effective ways to support growth then sharing lessons from past interventions, experimentation and evaluation will also matter.
The What Works Centre team is busy developing a set of guiding principles, some detailed examples of how to apply them in key policy areas, and a new series of toolkits to support local areas in the development of local industrial strategies which we aim to publish shortly.
It is also holding a one-day conference on the 25 June on how to design and deliver local industrial strategies – click here for more details.
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