With the Autumn Statement dominating media headlines, you’d be forgiven for overlooking the much-hyped Government Industrial Strategy. Today, the Prime Minister has set out plans for far-reaching changes and announced a consultation Green Paper to be published later this year. Here is a short Headland guide on what to expect:
WHAT IS THE ‘INDUSTRIAL STRATEGY’?
From the word go, a “proper industrial strategy” has been integral to Theresa May’s brand as the Prime Minister. She has defined it as “identifying the industries that are of strategic value to our economy and supporting and promoting them through policies on trade, tax, infrastructure, skills, training, and research and development”.
The Prime Minister has since identified these industries as: “financial services… life sciences, tech, aerospace, car manufacturing, the creative industries and many others”. She is looking to support across regions (in a clear expansion of her predecessor’s prioritisation of the Northern Powerhouse and Midlands Engine).
Not only does the idea of a “proper” strategy appeal to Brexit-weary business leaders, but also, through the commitment to vocational skills and regionalism, to the Prime Minister’s new target audience: those “just about managing” – or in Number 10 terms – JAMs.
WHAT’S IT SET TO CONTAIN?
The Prime Minister
and Business Secretary
have given several indications of the direction of the Industrial Strategy. However, in a speech
to the Confederation of British Industry ahead of the Autumn Statement, there
has also been some confirmation of plans – all within the context of boosting productivity:
- R&D: Investment of an extra £2 billion a year in R&D by 2020 and the establishment of an Industrial Strategy Challenge Fund to direct this funding. The fund will back scientific research and technological developments.
- Tax: A review of the tax system to support innovation and a recommitment to George Osborne’s aim of cutting the UK’s corporation tax to the lowest in the G20.
- Start-up investment: A ‘Patient Capital’ review, led by the Treasury, is examining the obstacles to long term investment in start-ups. Sir Damon Buffini, the former boss of private equity firm Permira, is to chair the review panel. The review stems from the fact that whilst the UK is third in the OECD ranking for start-ups, it is 13th for the number that go on to become scaled-up businesses.
- State-backed technology: Inspired by US Government investment in technology, there will be a review of the government Small Business Research Initiative (which connects the public sector with innovators). Sir David Connell (a fellow at the Centre for Business Research at Cambridge University) will lead the review, considering what small businesses need to thrive.
- Corporate governance: The Prime Minister aims to establish the UK as the global leader in corporate governance. Referencing the “social contract” between business and society, there will be a review of corporate governance – including reform of executive pay and board representation of employees and consumers. Models for the latter will be consulted on with business in a Green Paper due later this year. The Prime Minister emphasised that “there’s nothing anti-business about this agenda”.
- Autumn Statement: Announcements by the Chancellor due on debt reduction, infrastructure investment and measures to boost the economy.
WE’VE HEARD THIS ALL BEFORE, RIGHT?
Industrial strategies are nothing new. Michael Heseltine vowed to intervene “before breakfast, lunch, tea and dinner”, whilst Vince Cable focused on championing eleven key sectors through high level forums. Most recently, under Sajid Javid, policy shifted as he sought to take Government’s hands off the wheel with a cross-sector “industrial approach”.
The Prime Minister has said that this is about “Government stepping up, not stepping back”. However, in her Conservative Conference speech she caveated that this is “not about picking winners, propping up failing industries, or bringing old companies back from the dead”.
The Business Secretary has clarified that this means a greater focus on positive operating conditions: “A strategic government must not be the protector of incumbency, but be constantly looking to create conditions to be open to new competitors”.
WHO’S LEADING THIS?
The centrality of the Industrial Strategy to Theresa May’s leadership priorities means that her own success will be measured against it. We can therefore expect the Prime Minister to be involved in key announcements.
Theresa May made her Industrial Strategy integral to the new business department, the Department for Business, Energy and Industrial Strategy (BEIS) led by Greg Clark – demonstrating the centrality of this theme to her Government as it works to build “an economy that works for everyone”. However, without the support of the Treasury, the policy will be redundant.
In July a Cabinet committee on Industrial Strategy was established, incorporating Secretaries of State from 10 departments, plus the Chancellor and Prime Minister. It demonstrates the cross-government approach to the policy, as well as the centrality of it to the Government’s plans.
WHAT’S THE TIMELINE?
The Prime Minister has announced that a Green Paper will be published this year for feedback from the business community. A White Paper will then be published in 2017.
WHO’S HOLDING THE GOVERNMENT TO ACCOUNT?
The BEIS Select Committee is running an enquiry on what the Government’s means by ‘Industrial Strategy’: how interventionist it should be; the pros and cons of a geographical or sectoral approach; priorities for the private sector; and global comparisons.
In October, Sir Vince Cable, George Osborne MP and Lord Heseltine gave evidence to the Committee to consider past approaches to industrial strategy.
WHAT DO THE OPPOSITION THINK?
Jeremy Corbyn has promised
to use state intervention to harness the fourth industrial revolution in Labour’s “new settlement for business
”. This comes with a clause attached that business must live up to its side of the deal on tax and workers’ rights: “Labour wants to engage with business and the workforce at all levels to design an industrial strategy that meets the needs of 21st century Britain
Labour’s Shadow Secretary for Business and Industrial Strategy, Clive Lewis MP, will have a key role in leading scrutiny of the Government’s Industrial Strategy in the House of Commons. He has set out the following points he will be measuring it against:
- Does it make Britain one of the most dynamic, competitive and productive economies in the world?
- Does it take our whole country with it? Shifting our economy’s centre of gravity away from London.
- Is it people-centred, providing good jobs and improving working conditions for people across the country?
- Does it create a healthy business culture?
With comments from both Mr Lewis and his Government equivalent, Mr Clark, about the need for consensus, the question now remains to be seen if both sides will live up to their word.