Industrial Strategy: a good start, but…

The government’s Industrial Strategy green paper contains some much-needed clarity, but as Terry Scuoler explains, there is room for more focus on a skilled workforce, competitiveness and support for exporters.

Terry Scuoler, CEO, EEF
Terry Scuoler, CEO, EEF.

At the end of January, we finally got sight of the government’s Industrial Strategy green paper. While this wasn’t the big reveal of a blueprint for the UK economy many might have been hoping for, it was a welcome start to a process of consultation on how a long-term strategy for industry should start shaping up.

The paper sets out 10 policy pillars that are, in effect, the priority areas to support economic growth, productivity and prosperity in every corner of the UK. It outlines action already underway by government departments and, crucially for EEF, it asks a lot of questions about what else government should be doing to bring industrial strategy to life.

(We’ve previously proposed that an industrial strategy should answer these questions: ‘Why have one?’, ‘What are the priority actions from government?’ and ‘How should these be implemented?’.)

Room for improvement

At first glance, the green paper appears to have all of our policy priority bases covered. However, some are covered more comprehensively than others. The importance of a competitiveness cost base is only really covered in the affordable energy section, but at least we have the words affordable and energy together – a step in the right direction.

Second, industrial strategy can only be a strategy if the importance of developing skills is clearly and transparently joined up with decisions on future regulations governing the world of work and employment.

Third, it is clear that the government’s intention is for the road to Brexit to put the UK centre stage in global trade. The strategy requires a skilful balance between securing the hoped-for overseas Free Trade Agreements and ongoing access to the EU Single Market, which still accounts for 44% of total trade.

Industrial Strategy EEF PQ - March 2017Related to this is the relatively low proportion of companies exporting in the UK and the weak rate of growth in exports as a share of GDP compared with most other G7 nations. One might also observe that targeting a particular value of exports has fallen out of favour in this strategy.

The aim to catch up with the G7 pack and ensure UK businesses are well placed to succeed in a post-Brexit trading environment has clear merit, however, and should be applauded. For example, the role of overseas embassies and consulates should be reviewed and, if necessary, more adequately resourced.

Global perspective

The outlook for global growth has fallen short of expectations in recent years with changes to the structure of global value chains, protectionism and the availability of trade finance all potentially factors at play. The jury is out on whether this downward shift in trade growth globally is structural or cyclical, but a good strategy should identify the potential downsides as well as the opportunities.

In summary, the majority of the pillars feel about right, with a strong focus over the long term, and on increasing productivity and driving growth. Joining this up across institutions, whether they be Whitehall-based or regional, is mission critical for the strategy to address coordination problems across government. A more consistent and explicit focus on a competitive cost base would provide good underpinning foundations for industrial strategy.