Despite the Bank of England’s recent downward revision of its inflation forecast, it’s not all doom and gloom for the UK economy. After all, it remains the fifth biggest economy in the world and is the joint fastest growing in the G8. But there’s no denying it’s beset by a number of challenges. Productivity growth remains stagnant – an area the UK continues to lose ground on compared to competitor economies – while economic growth is disproportionately centralised around London and the south east.
What’s more, the UK’s decision to leave the EU, cemented by the recent triggering of article 50, has set the country on an uncertain path. This new direction presents new opportunities and challenges for the UK economy to, as Theresa May said, “Change the way our country works – and the people for whom it works for – forever”.
The UK’s industrial strategy can play a vital role in affecting this change, but it must do more than simply connect existing policy dots. It should set the vision for the country’s economic future by driving localised, sector-orientated growth; redressing economic imbalances; and increasing the competitiveness of UK firms. The green paper strikes the right tone for this change and we hope its next incarnation offers the comprehensive, long-term vision the UK needs.
With this in mind, I’ve outlined three overarching principles that will help the government ensure the industrial strategy is a success.
Look to the future
Digital technology is transforming and disrupting the way businesses and societies operate – ushering in Industry 4.0, the Internet of Things and the Gig Economy.
It’s changing the way we live and work; how goods and services are provided by businesses; the role of government; and how government’s services are provided to citizens. It also poses new challenges to our economy. How can we increase productivity whilst striking a balance between job creation and automation and efficiency? How can we identify which sectors and technologies are changing – and what the opportunities are? How can we promote inclusive economic prosperity when regions are likely to be disrupted in different ways and to varying degrees?
This transformation is happening now, so the strategy must embrace this technological change; capitalise on new, emerging opportunities and look for positive, forward-thinking to solutions to existing challenges. The UK government often leads the way in terms of practical policy responses – from the upcoming Taylor report that will evaluate the ‘Employment practices in the modern economy’ to the work of the Catapult Network in stimulating innovation following the Hauser Report in 2010. But the government must do more when it comes to developing a forward-thinking, coherent strategy that’s mindful of the impact these changes are having on business and citizens.
UK Trade and Investment: Driving economic growth and securing over 150,000 jobs
Build a strategy that lasts – and stick to it
The propensity of policy makers to introduce substantial adjustments to strategies after having agreed them, is the main threat facing the industrial strategy. Over the last 10 years we’ve had interventionist, sector-focused industrial activism give way to a more sector-agnostic industrial policy. The focus later became the eight great technologies, while more recently there’s been a shift to place-based growth and economic rebalancing with the Northern Powerhouse and Midlands Engine. The success of the UK’s industrial strategy is ultimately dependent on buy-in from a private sector that’s change-weary. So by picking an approach and sticking to it, the industrial strategy will avoid being seen as ‘just another policy change’ rather than the flagship change it needs to be.
The green paper states its aim is "to establish an industrial strategy for the long term." And it must follow through with this stated intention and develop a strategy that resists the swings in policy and changes in the workings of government. After all, these are the foundations successful industrial strategies of South Korea or Germany are built on.
Make the industrial strategy a framework for change
A strategy should demand action. It needs to articulate a clear vision whilst identifying the key elements that need to be addressed to realise this ambition and how progress will be measured. The vision of the industrial strategy should be clear, have defined outcomes and be underpinned by quantifiable and measurable metrics.
The government will then be able to direct policy across government towards a unified, collective goal; monitor progress of the strategy’s outcomes; and highlight what constitutes effective and ineffective policy in terms of delivering results. Beyond this, the strategy should indicate to businesses, and its citizens, that the UK will remain a competitive place to do business and reaffirm the government’s ability to deliver on its objectives.