Industrial strategy is back. The Prime Minister has backed it. There’s a Government department re-named after it. But what will this mean in practice for UK businesses? Industrial strategy has waxed and waned in prominence, meaning and content over recent Governments. There are two strands of thinking to consider in reviewing these fluctuations.
The first strand could be termed the ‘horizontal’ – the policy initiatives that are designed to float all boats, such as education, skills, R&D tax breaks and innovation. Here, although the component policies change and effectiveness can be debated, there’s been reasonably consistent Government support.
More interesting is the second strand, the ‘verticals’ – policies specific to sectors. Here there’s been considerable variation between business secretaries as Governments have sought a balance between ‘picking winners’ and broader strategic support. Peter Mandelson was an interventionist, moving fast to protect companies from the fall-out from the 2008 financial crash. Vince Cable had similar instincts but was constrained by then Chancellor George Osborne. The coalition’s ‘splitting the difference’ approach was brought to an abrupt halt by Thatcherite Sajid Javid – until the political realities of the steel crisis forced a practical accommodation. So where will Greg Clark sit in this political spectrum?
What are the current straws in the wind?
Clark has explicitly set out that industrial strategy needs to be ‘place based’ and is not a one size fits all solution for the UK – a continuation of his passion for championing local devolution deals. The view that there are strategic sectors deserving of particular support is also explicit – financial services, life sciences, tech, aerospace, car manufacturing and the creative industries have been named by the PM. The Chancellor has declared his interest in “careful, targeted public investment in high value infrastructure” and expect bite-sized investment announcements in the Autumn Statement. Responsible capitalism has shown itself in a number of forms – pay your taxes, watch CEO pay, maybe even put workers on Boards.
A political consensus?
There are elements of commonality between the Government and Labour at headline level. Support for more innovation and skills development is agreed. There is broad support for infrastructure development. Shared concern about making the economy deliver more for the ‘ordinary’ person on the street is also noteworthy.
But there are clear areas of difference. The role for ‘public institutions’ is much stronger for Labour. The extent that ‘fairness’ can be incrementally improved vs the need for profound change sees both parties a long way apart. Whilst both parties seem to have varying degrees of unease about globalisation and technology on employment and living standards, the directions they’re tugged on the issue are very different.
So what can businesses expect?
Local focus. Some architecture for economic localism is already in place, however uneven the experience has been to date, e.g. LEPs and growth deals. There may well be more authority given to existing structures and possibly more delivery vehicles in the Heseltine mould.
Infrastructure. Sajid Javid’s planning approval for shale exploration may indicate a new boldness. Expect a shift from a small number of large projects to a large number of small projects.
‘Strategic sectors’. Previous BIS administrations have stressed that ‘sector councils’ are as much about what sector can do for itself as asking for Government support. Whilst the structures might change, the attitude is unlikely to. So be prepared to commit time, resources and funding.
Innovation. We can expect that sustained investment in science and innovation will be a central feature – with guarantees protecting EU funding post Brexit.
‘Fairness’. The vast majority of businesses are responsible corporate citizens. Now is the time to up the visibility of this individually and collectively.
Greg Clark is said to be writing the industrial strategy consultation personally. Whatever he concludes, it will have the No 10 stamp of approval.