By Ben Walters
On the 23rd January, the government released a green paper on its new Industrial Strategy, as a public consultation. This is the first major strategy since the new government, and further clarifies the changing economic approach that will be taken over the coming years. It continues an increase in interventionist policies (such as the 2016 Autumn Statement), as well as a focus on regional inequality and productivity. While the main influences of these policies (Theresa May, Greg Clark and Phillip Hammond for the Autumn Statement) of the strategy were not ‘Leavers’, they are all seen as governments response to the referendum, and how to adapt the economy to best meet the challenges and opportunities this presents. The Green Paper mentions how many of its policies are targeting improvements in the long-term, rather than short term fixes. Below are the three main objectives of the strategy:
· Build on our strengths and extend excellence into the future.
· Close the gap between the UK’s most productive companies, industries, places and people and the rest.
· Make the UK one of the most competitive places in the world to start or grow a business.
The paper outlines the strengths of the UK economy and labour markets, before discussing the lack of real wage growth since the 2008 recession, as well as faltering productivity levels, particularly by ‘per hour worked’ metrics, as well as increasing disparities among productivity between different regions of the UK.
In order to meet these objectives, the strategy also outlines 10 ‘pillars’.
1. Investing in science, research and innovation
2. Developing skills
3. Upgrading infrastructure
4. Supporting businesses to start and grow
5. Improving procurement
6. Encouraging trade and inward investment
7. Delivering affordable energy and clean growth
8. Cultivating world-leading sectors
9. Driving growth across the whole country
10. Creating the right institutions to bring together sectors and places
While all of these pillars have been created equally, I have highlighted some that seem to have a greater backing than others (whether through policy support or political rhetoric). On skills, there will be an increase in technical education around the UK, focusing on STEM subjects, with dedicated technical centres for non-university education. Infrastructure had significant support in the Autumn Statement, but less of substance announced today. The Inclusive Growth Agenda supports the 9th pillar well. And the 10th is supported by the devolution, as well as both the Northern Powerhouse (more info below) and the Midlands Engine.
In regards to cultivating world-leading sectors, slightly more content has been released today. Government is designating industry ‘Champions’ for 5 sectors (Life Sciences, Ultra Low Emission Vehicles, Industrial Digitalisation, Nuclear, and Creative Industries). They do not commit to financial support, but to encourage industries to “come to the Government with proposals to transform and upgrade their sector through ‘Sector Deals’”. These deals are open to all sectors, not just those with designated ‘Champions’.
While the green paper did not announce any new money, it does tie together a number of funding opportunities. For example, the ‘Industrial Strategy Challenge Fund’, which invests £4.7bn in research and development, will partially be used to support the Industrial Strategy. £556mn for the Northern Powerhouse was also allocated to individual LEPs (after being announced in the Autumn Statement), often towards projects supportive of the Industrial Strategy. And the Industrial Strategy will also guide further government economic policy, making possible the introduction of further funding at a later date. For example, in his introduction, Greg Clark links its strategic approach has been used in decisions on Hinkley Point C, Heathrow’s 3rd runway, other private investment announcements and the Autumn Statement’s increase in R&D funding.
While much of what was released matches what has been rumoured or openly discussed, several policies have been left out. These include widening corporate takeover rules, as well as corporate governance. The consultation runs until the end of April, so the white paper targeted for ‘early 2017’ has likely been pushed back to the summer.