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Anatomy of an industrial strategy

strategy launch

It is perhaps fitting that the national industrial strategy announced in Janu­ary was resurrected by the Conservative Party, given that it was the Conservatives who killed it.

Having been maligned as a failing (and sometimes flailing) attempt by Labour to arrest the country’s industrial decline in the 1970s, the strategy was abolished in the Thatcher years in favour of a more laissez-faire approach. The idea remained dead until the after­math of the 2008 financial crash, which took a sledgehammer to the political consensus that the Government should minimise its intervention in the market economy.

As the Cameron administration sought to ‘rebalance’ the UK economy, there was an increasing willingness in Westminster for targeted interventions in key sectors.

A strident example of this change in approach came during the steel indus­try crisis last year, when the Govern­ment indicated that it would intervene to support a sector struggling in the global market because it was seen to have strategic value.

But this was an unusual example of direct intervention. The industrial strat­egy of the Cameron years had more to do with shaping the business environ­ment than direct intervention, and was focused on areas such as access to finance, the development of supply chains, skills shortages and support for emerging technology.

Whitehall was wary of fully embrac­ing this idea. The impetus behind industrial strategy came from Liberal Democrat business secretary Sir Vince Cable and, while it was touted as a con­cept under the coalition Government, it was never deeply embedded in policy.

After the Conservatives took power independently in 2015, the idea appeared to have waned. In the year before Cameron’s resignation, calls from Labour to adopt a formal strategy in response to the steel crisis were rejected.

By contrast, Theresa May has made the idea very much her own, and trans­formed it into a cross-cutting frame­work for all departments. The new industrial strategy more closely resem­bles the approach of the Cameron years than that of the pre-Thatcher Labour Government.

It is based on 10 pillars:

  1. Investing in science, research and innovation
  2. Developing skills
  3. Upgrading infrastructure
  4. Supporting businesses to start and grow
  5. Improving procurement
  6. Encouraging trade and inward invest­ment
  7. Delivering affordable energy and clean growth
  8. Cultivating world-leading sectors
  9. Driving growth across the whole country
  10. Creating the right institutions to bring together sectors and places

Among the major policies it contains are plans to create new institutes of technology, a consultation on a new Industrial Strategy Challenge Fund and a significant increase in spending on science. It also places emphasis on emerging technologies, such as battery storage, and promotes the life sciences sector.

The response so far has been mixed. On the one hand, former shadow busi­ness secretary Clive Lewis suggested the strategy was too meek. Even the Econo­mist labelled it “a bit thin”, although it welcomed the omission of policies such as including workers on boards.

Nevertheless, there is some disquiet within the Conservative Party about this more active approach to economic intervention. Responding to a state­ment after the strategy was published, Conservative MPs including Richard Fuller and Sir Desmond Swayne voiced concern that the plan would extend in scope to more closely resemble its pre-Thatcher antecedents.

Soon after May had announced her intention for a new industrial strategy, Mark Littlewood, director general of the Thatcherite think tank Institute of Economic Studies, said the very name had “[sent] shivers down the spines of those of us who think there is already far too much state intervention in the economy.”

In truth, there are few indications that the Government is inclined towards an overreach.

Business secretary Dr Greg Clark assured MPs that he continued to see the value of tax simplification and deregulation, arguing that both had been crucial “to make and keep the UK as one of the best places in the world to found or grow a business”. It is not sur­prising in this context that resources minister Therese Coffey has said that Defra “cannot regulate” to achieve a more resource-efficient economy.

However, the waste sector can find a part for itself in some aspects of the strategy.

CIWM chief executive Colin Church highlights the waste sector’s “potential to become a valuable source of feed­stocks for industrial growth sectors, including the UK bioeconomy”. Steve Lee, director general of Resources and Waste UK, emphasises the value of the sector in providing “resource pro­ductivity and security”, which chimes with the industrial strategy’s aim of building UK supply chains.

The Government has also worked to stimulate investment. The commitment to publishing an emissions reduction plan, for instance, is intended to provide future certainty in the energy sector, which has been badly hit by sudden changes in Government policy on sub­sidies.

On a more local level, the housing white paper may help to provide greater clarity around local procurement. The Government has announce plans to “set out in policy the key strategic priorities that every area is expected to plan for… with an additional requirement to plan for the allocations needed to deliver the area’s housing requirement”. These pri­orities will be those listed in the National Policy Framework, including waste management.

But despite the Government’s assur­ances, there is still a lack of certainty around the impact of Brexit.

The Brexit white paper contained assurances about existing EU environ­mental law being incorporated into British law through the Great Repeal Bill, and about the Government’s com­mitment to the targets set out in the Climate Change Act 2008. However, concerns are likely to continue about the direction of travel in terms of future policy-making.

Moreover, there would be less chance of direct reproach for the Government if it failed to meet its environmental tar­gets once outside the purview of the European Commission.

The uncertainty around future trad­ing relations with the EU and the pros­pect of future trade deals with other countries also creates uncertainty around international supply chains and the competitiveness of UK companies under new trading arrangements.

Though the Government has shown a willingness for strategic interventions, it will be up to individual sectors to demonstrate their strategic value. Moreover, in the potential horse-trad­ing that may follow the triggering of the Brexit process, the priorities laid out at present may have to be rapidly redrawn.

With the economic future of the country unclear, the industrial strategy may yet again be seen as a flailing attempt by a Government to control forces beyond its ken.

Sector reaction verbatim:

“Businesses across all sectors are become increasingly aware of the value to their efficiency and, subsequently, bottom line in realising a circular economy where waste is minimised, energy costs controlled and producers are able to rely on quality secondary raw materials within the supply chain. The opportunity afforded by the industrial strategy to seize the potential economic opportunities offered by the resource management sector is there for the taking.”

Suez UK chief executive David Palmer-Jones

“Deploying ‘pull’ mechanisms that promote the use of locally produced materials rich in recycled content will help to support a robust national circular economy and embrace the use of innovative technologies. This is turn will result in a thriving economy and also secure valuable resources for us and future generations.”

British Metals Recycling Association

“The publication of an industrial strategy is an important first step in achieving a strong, sustainable and world-class steel sector. We will continue to work with the government to embed UK steel as a foundation industry, promote skills, productivity and local growth, deliver cost competitiveness and world-class innovation, focus on long-term investment and continue the drive for decarbonisation.”

Gareth Stace, director, UK Steel

“The strategy is bold and a pathway for sustainable economic growth. Not only does it look to investment in next-generation infrastructure, it prioritises energy and the low-carbon economy. The emerging strategy, by using areas such as smart procurement, has the potential to boost resource policy, aligning it to a new manufacturing framework. Doing so offers the promise of ensuring the uk has high-quality secondary raw materials to feed a new generation of manufacturing firms.”

Pennon Group chief executive Chris Loughlin

“The strategy has a vital role to play in underlining the importance of resource productivity, which ought not to be seen as an add-on for each technological innovation but an integral success factor. Smart design can optimise energy efficiency, clean energy use and waste reduction while achieving performance and cost improvements.”

Dr Celine Herweijer, PwC partner, sustainability and climate change

“We welcome the green paper and in particular the focus on investing in science, research and innovation. We estimate that a government investment of £50m over five to seven years in a centre for anaerobic biotechnology and bioresources research would provide the initiative to deliver a step change in the rate of development, putting the UK at the heart of this £1TR global industry.”

ADBA chief executive Charlotte Morton

Madhav Bakshi is political analyst at DeHavilland

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