Industrial Strategy: The case for long-term thinking

Posted on 13 Mar 2019 by The Manufacturer

The Industrial Strategy has real potential, but it can only fulfil that potential if it maintains its course over the next 10, 20 even 50 years.

The recent launch of the North West Pilot by the Made Smarter Commission is the latest, and most tangible evidence of the government’s Industrial Strategy that

It promises much, but such is the nature of politics that even the best initiatives can find themselves under threat, as became evident earlier this year when divisions within government emerged over funding for the strategy.

Business team working together Industrial Strategy Productivity Growth Leadership - image courtesy of Depositphotos.
Theresa May is not the first politician to advocate an industrial strategy in modern political history – image courtesy of Depositphotos.

The Industrial Strategy is something of a test for the UK. We’re largely unfamiliar with genuinely over-arching national strategies, not least those that are long-term, interventionist by nature, and require cross-party consensus.

Building a Britain fit for the Future, the subtitle of the Industrial Strategy White Paper published in 2017, is an ambitious and comprehensive document, with its ‘Grand Challenges’ and themes, sector deals (from rail to aerospace and from food and drink to a data ‘revolution’) and the promise to raise total R&D investment to 2.4% of GDP by 2027.

It seeks to respond to the rallying cry of ‘creating an economy that works for everyone’.

Of course, Theresa May is not the first politician to advocate an industrial strategy in modern political history – nor is she even the first Conservative politician.

Michael Heseltine, as president of the Board of Trade in the 1990s, stated that he would intervene “before breakfast, lunch, tea and dinner” to promote the interests of UK plc.

Peter Mandelson was brought back into the Labour government in 2008 as global business tsar, later telling the BEIS committee that he aspired to a world where industrial strategy was part of the government DNA.

“I reclaimed industrial strategy from the smokestacks of the 1960s and 70s. It wasn’t about propping up failed industries. I saw myself more as an industrial activist.”

Vince Cable and David Willets under the coalition government outlined a vision for an industrial strategy, explaining, “Market forces are insufficient for creating the long-term industrial capacities we need.”

This article first appeared in the March issue of The Manufacturer magazine. To subscribe, please click here.

Where the May Industrial Strategy differs is the scope of its intent and its call to arms across sectors, communities, even political groups.

Learn from the past

Manufacturers - Prime Minister Theresa May will use her first regional Cabinet meeting to launch a modern Industrial Strategy.
Does the present government have anything to learn from its predecessors?

Does the present government have anything to learn from its predecessors? What happened to the Heseltine or Mandelson strategies? Where are they now, and can they help us underpin the survival of the current Industrial Strategy?

I’d argue that if you look closer, those strategies are still with us, woven through the foundations of today’s Industrial Strategy. They were part of its evolution.

Michael Heseltine’s ideas fed into the coalition’s plans, as did Peter Mandelson’s, which contained many of the themes of the current approach: the importance of sectors such as aerospace, automotive, life sciences, and creative industries; innovation and the creation of Catapults; and the need to up-skill the workforce.

The current Industrial Strategy has now entered a critical phase, some would say vital. After eliciting the enthusiastic reaction of the private and public sector, the media and academia, government must be seen to make real progress and deliver on its initial promise.

The Strategy’s ambitions have been widely praised, including by noted commentators. But now is the time to make the words count, learning from the experience of our history.

We can draw on lessons from the past to set out the blueprint for the implementation of the Strategy. This should be underpinned by four imperatives: first, defining the approach to deliver the Strategy; second, setting the standards (or the main economic and societal objectives); third, taking actions in response to the main goals; and fourth, measuring progress.

For me, that means that if the Strategy is to succeed it needs to be ‘culturally’ embedded. That means it should be owned by business and academia, and be equally relevant to the truck driver, the research scientist and the production manager – in fact, the whole population, so that it can withstand political fashion or temporary financial priority.

And to become part of people’s cultural landscape, the Strategy debate has to pull together a range of different actors, including government departments, the business community and social organisations. This is not a challenge for one part of our nation, but for us all.

The productivity puzzle

Stock Growth Productivity
Productivity is a stubborn challenge that needs to be addressed to boost growth and improve living standards.

The White Paper clearly identified productivity as the stubborn challenge that needs to be addressed to boost growth and improve living standards. This is sensible if we consider that productivity is one of the metrics commonly used to estimate the level of current and future well-being in a country.

However, a long-term strategy should be ambitious enough to pursue higher objectives that reflect the society that we want to become. Among these, we could mention decarbonising the economy, or promoting more inclusive growth across people and places.

The Grand Challenges respond, at least in part, to this point, although they still have some way to go in terms of activity.

Future actions have to be consistent with the objectives that we want to realise: building the infrastructures that underpin the progress into the digital age; rethinking the education system to increase STEM skills and encourage life-long learning; and enabling wider access of small business to programmes that support investments in R&D and Industry 4.0. These are some of the key levers that must be addressed.

At the World Economic Forum in Davos, Philip Hammond lauded the international leadership of the British digital sector. The Chancellor is right. Britain is at the cutting-edge, we have an array of powerful talents at our disposal and yet the UK still struggles to spread the benefits of digital technologies across supply chains and the wider society.

Without real commitment, most of these opportunities will remain untapped and the existing disparities will, if anything, grow.

Last, the Strategy requires energy and leadership from the independent Industrial Strategy Council, established with the task to scrutinise and measure the Strategy’s progress. This will be crucial to its credibility, as we recommended in our paper, Creating, not picking winners.

Although it took some time to bring the body together, its chair, Andy Haldane, chief economist at the Bank of England, will need to give the Council authority to rapidly remove any doubts of intent.

This Industrial Strategy has real potential to transform the UK’s economic landscape for the better, but it can only fulfil that potential if it maintains its course over the next 10, 20 or even 50 years. Our politicians need to learn how to work with timescales like that.

The £20m North West Pilot by the Made Smarter Commission was launched in November 2018 during Digital Manufacturing Week.

It aims to test out the most effective ways to engage with manufacturers and encourage them to adopt technologies – with a particular emphasis on SMEs. 

Click here to learn what the Pilot entails and how you can get involved

Chris White is director of the Institute for Industrial Strategy at King’s College London. Until 2017 he was Member of Parliament for Warwick and Leamington.