Industrial Strategy must be future of Govt policy

Posted on 18 Apr 2017 by Jonny Williamson

An industrial strategy must systematically tackle the UK’s long-term structural weaknesses with a bold, focused and specific set of policy measures, but manufacturers believe it can only be achieved if government sets itself measurable goals and ensures a policy framework which forms the basis of future fiscal statements.

Industrial Strategy Sparks Grinding Industry Manufacturing UK Manufacturers Stock Image Pixbay
The challenges of unbalanced growth and weak productivity in the UK are longstanding and undisputed – image courtesy of Pixabay.

The call was made by trade association, EEF, in its submission to the government’s consultation on industrial strategy which closes today (April 18).

According to EEF, the challenges of unbalanced growth and weak productivity are longstanding and undisputed. As such, government strategy should be bolder in its ambition to tackle three priority outcomes: reduce the productivity gap with G7 competitors; increase the contribution to GDP growth from net trade; and, raise the UK’s innovation performance from follower to leader.

Chief Executive of EEF, Terry Scuoler explained: “Successive governments have identified the UK’s weak productivity performance and resolved to tackle it, arguably with little success. This time it can be different, however, and we have a real opportunity to make a step change in the UK’s economic performance.

Scuoler described the Industrial Strategy Green Paper as a “positive first step” in what he referred to as an “evolutionary process”. However, a successful strategy must be more than a “list of policy action points”, he added.

“Manufacturers in search of both a competitive and predictable business environment will need to be confident that future government policy decisions will influence their decision to invest and grow employment in the UK, are anchored in the ambitions of industrial strategy and that Whitehall departments are not allowed to ignore them.

“In the longer-term, the ten pillars which have been correctly identified must become the foundation around which future economic policies are created and implemented. Critically this must also include those decisions that determine the UK’s future relationship with the European Union.”

According to EEF, the ten pillars identified in the green paper are the right areas for government on which to focus its policy, potentially enabling more investment and productive activity to take place in the UK. The most important of these for manufacturers are support for a more skilled workforce, investment in more reliable infrastructure, and world class support for companies planning to innovate and export.

10 talking points on industrial strategy:

  1. EEF and its members are pleased to see industrial strategy back on the government’s agenda.

Brexit or not, EEF and its members have been calling for a reinvigorated Industrial Strategy to shape the direction of policy in support of stronger growth and improved productivity.

  1. The consultative nature of the approach to developing a new strategy is welcome and manufacturers are keen to input their views.

A change from the past there is further opportunity to shape the evolution of the strategy.

  1. There is focus – the cross-cutting policy ‘pillars’ in the green paper are broadly right.

Skills, infrastructure, energy and innovation – all areas over which government can exert influence to shape outcomes for the private sector. There are no surprises, but nothing major missing.

  1. But the policy detail under each pillar is somewhat variable.

There is more detail and resource in some pillars than others. Science and innovation feels comprehensive and builds on success of existing schemes and the infrastructure pillar is a reminder of progress made on improving decision making on big projects. On energy, there is more detail needed on who will benefit from lower costs and more focus on the transition to a low carbon economy; and on skills manufacturers want more detail on how they can work with education providers and shape curricula.

  1. This needn’t be a big concern now – it’s more important government gets the framework right from the start and the policy detail will evolve.

Building a strategy that offers businesses certainty and predictability about policy decisions is a top priority from the outset. A clear sense of direction and all new announcements falling under the 10 pillars from the outset are critical in embedding the strategy and building confidence in it. Inevitably the policy detail will develop over time.

  1. There remains a sectoral component to the strategy, but this is less dominant and more industry driven than previously.

Sector deals – along the lines of previous place based deals – are the new mechanism for removing barriers to success for particular sectors, supply chains or clusters. These will look different from past sector councils in that the private sector will need to organise itself, be clear about shared ambitions and the action government can take to enable success.

  1. But discussions with manufacturers and other industry bodies points to the need for more structure to get good deals that make a genuine difference to the fortunes of sectors.

The only parameter companies have, from government, in putting a deal together is that is won’t (currently) involve new money. More guidance is needed on the process for agreeing a deal, governance arrangements and timescales. Clarity on these will improve the chances of successful deals.

  1. The main missing element is a vision of what success looks like, with some measurable benchmarks against which progress can be measured.

The green paper focuses mainly in the policy ‘how’ and less on the why. While weak productivity is cited as a problem for the UK, a new industrial strategy must set out what success will look like. This should be a small number of ambitious, but measurable benchmarks, which resonate with the strategies of industry. Our top three – narrowing the G7 productivity gap; increasing the net trade contribution to growth; moving to innovation leader in Europe (EU innovation scoreboard).

  1. Clarity on industrial strategy outcomes should also help all parts of government to ensure policy consistency.

These types of goals should mean that businesses see a more consistent and focused policy efforts both across government department and in pursuit of a small number of ambitions.

  1. Government’s existing approach on ‘place’ fits with how we would like to see industrial strategy delivered.

There is a strong place dimension in the green paper. Action that is already underway to devolve power and funding to local areas, create combined authorities and elect mayors is the basis of better sub-national decision making on priorities such as infrastructure and planning. We should continue with this process; there isn’t a need for new institutions to deliver strategy outcomes.