‘Leapfrog’ Industrial Strategy required to capitalise on digital age

Posted on 6 Nov 2017 by Jonny Williamson

The digitalisation of manufacturing is well underway and the UK is in pole position to benefit from it, but only if it’s given the priority it needs and isn’t crowded out by Brexit.

Industrial Strategy Productivity Digitalisation Technology Industry 4 4IR Digital - Stock Image
The UK can be one of the world’s digital winners, reversing its poor productivity record, raising living standards and creating a fairer society.

With its strong eco-system of large and small firms, outstanding science base, proven innovation and unmatched talent pools, the UK can be one of the world’s digital winners, reversing its poor productivity record, raising living standards and helping to create a fairer society.

However, seizing the opportunity will need a new kind of Industrial Strategy. The opportunities are great, but so are the challenges.

As many as 35% of jobs could reportedly be displaced by automation and artificial intelligence: new ones will take their place but will require a strategic approach to retraining.

Thinking needs to be long-term, rooted in a new ’partnership of the century’ between government and business, and crucially, it needs to be a ‘leapfrog’ strategy, aimed at the UK overtaking competitors, not just catching up.

A survey of more than 400 firms, published today (6 November) by the CBI, shows there is strong consensus among firms (82%) that the main pillars of our new industrial strategy need to be people, infrastructure and innovation. They say that all three need to be transformed to power a new, modern economy.

However, uncertainty is taking its toll, with key concerns including: uncertain economic outlook (54%) and what post-Brexit trade will look like (39%). An effective industrial strategy can be a tonic for uncertainty, but the government must learn from historical missteps and build cross party consensus.

To support this, the CBI recommends the creation of an independent Industrial Strategy body, similar to the OBR, that could measure, advise and build confidence that this plan will last.

Regional industrial strategies are a large part of the solution. Every region of the UK has special strengths that can be unlocked by devolution and tailored strategies. To ensure no part of the UK is left behind, the CBI recommends the appointment of a regional commissioner to oversee delivery, regardless of local political structures.

Carolyn Fairbairn named as next CBI director-general
Carolyn Fairbairn, director-general, CBI.

CBI Director-General, Carolyn Fairbairn explained: “As uncertainty continues to bite on the UK economy, there has never been a more important time for the UK to unite behind a ‘leapfrog’ industrial strategy.

“The aim is to enable British firms to compete and win in the new technology age. It is also urgent. Change is coming at lightning speed and the world won’t wait for Britain.

“This means we can’t afford to let Brexit distract from the long-term action that is so badly needed. What’s at stake is the UK’s future in a global economy redefined by artificial intelligence and automation. Brexit must not be allowed to crowd this out.

“Firms agree on what matters most: transforming the UK’s skills base, modernising its physical and digital infrastructure and accelerating innovation. But they also agree that catching up is not enough.

“A leapfrog industrial strategy is within reach but not easy and will require a partnership of the century between government and business. Nobody wants to have this conversation again in four years’ time, and jobs and opportunity won’t wait around.

Some of the main survey findings include:

  • 89% believe that a modern Industrial Strategy could be a significant opportunity to improve living standards across the UK by 2030
  • Uncertainty is constraining investment with key concerns including: uncertain economic outlook (54%) and what post-Brexit trade will look like (39%)
  • Business is clear that people (28%), innovation (27%) and infrastructure (27%) will drive living standards across regions and sectors. Over 80% are clear that unless we prioritise these, work on place (2%) and sectors (17%) will falter
  • Clear risks to its successful implementation include: lack of a long-term vision (35%); lack of attention to Industrial Strategy by government due to Brexit (29%), lack of cross-party buy-in (15%)
  • 42% of firms believe that devolution is a significant enabler to making Industrial Strategy a success, with half (50%) stating that better collaboration between local authorities and business will be essential

To deliver the Industrial Strategy successfully, the CBI urges the government to:

  • Build a new style of partnership between government and business, tasked with leapfrog thinking in skills and retraining, infrastructure and innovation
  • Set up a joint commission on Artificial Intelligence in 2018, involving both business and employee representatives, to better understand the impact on people’s lives, jobs and our future economic growth
  • Deliver on the recommendations as laid out by the Made Smarter (formally Industrial Digitalisation) Review, chaired by Siemens UK CEO Juergen Maier
  • Establish an independent Industrial Strategy Office – similar to the Office for Budget Responsibility – to measure and monitor performance and give impartial advice on industrial strategy progress.
  • Appoint an independent commissioner to ensure all regions of the UK have appropriate levels of devolution to deliver the Industrial Strategy
  • Work across the party spectrum to ensure that strategy sits above political cycles.