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An industrial strategy needs clear objectives

It’s all about place

By Adam Marshall  

AHHK93 Hinckley Point Nuclear Power Station Severn Estuary UK aerial view

For a lot of people in the business world, the phrase “Industrial Strategy” conjures up images of unsuccessful government efforts to direct the development of the economy, or grand sector-specific initiatives that rarely reach their goals.

The difficulty with previous attempts to develop an industrial strategy has been the adoption of a centralised, Whitehallknows- best approach, focused on high-profile, sectoral interventions, coupled with an inability to transform high-level strategic thinking into real change. This time, things must be done differently. The UK faces a decade of challenges as the Brexit process unfolds. The latest effort at industrial strategy must be guided by a small number of clear and ambitious missions: a set of once-in-ageneration goals that bring the resources of government, business and the wider public together to deliver lasting growth.

The strategy comes at a critical time, as we search for a new national consensus on what sort of country the UK wants to be and as we re-negotiate our trading relationships with countries across the world. However, the outcome of these international negotiations will mean little if our new industrial strategy lacks focus on geography and place.

At the British Chambers of Commerce we have often stated that an industrial strategy that supports places is as important, perhaps even more so, than supporting individual sectors. If the strategy can remove barriers to local growth, new concentrations of business and innovation will emerge.

To succeed, the effort of Greg Clark, the Business Secretary, must harness the geographic and historical advantages that have shaped our towns, cities and counties. From nuclear in Somerset, Suffolk or Cumbria, to shipping in Hull, Teesside or Dover, innovative clusters of businesses have sprung up not because of direct government intervention—but because local conditions were right for growth.

By creating an industrial strategy that is both pragmatic and practical, and one which helps places to succeed, ministers could help create a strong and thriving business environment. But a fuzzy, high-level analytical strategy will simply gather dust on the shelves of Whitehall and the political science departments.

A focus on place also requires a wider focus on the fundamental infrastructure that is required for businesses to start and grow. Concrete, pragmatic interventions like upgrading roads, supporting supply chains, unblocking access to ports, and ensuring that mobile and broadband black spots are addressed would do more to build a competitive and productive business environment than any number of fluffy, short-lived initiatives. The effect of addressing such practical, local priorities would be substantial, especially when taken together with big-ticket infrastructure projects like Heathrow expansion, HS2, Crossrail in London and the emerging Crossrail North to boost east-west connectivity across the north.

Across the country companies are increasingly reporting difficulties recruiting people with the skills they need. Plugging these growing gaps, and working with firms to ensure they have a consistent and accessible training system, would boost productivity and local growth potential.

What’s more, a successful industrial strategy also requires a re-examination of the taxes and charges levied on businesses— many of which stifle risk and undermine investment. The government must also take action on the burden of upfront costs, including business rates, insurance premium tax, the Apprenticeship Levy, a fast-rising National Living Wage that pushes up pay across the board, and pensions autoenrolment. Put together, these costs hit firms regardless of their circumstances or of broader economic conditions, taking away cash that might otherwise be used to grow the business.

The biggest single risk to a successful industrial strategy, however, is that Brexit becomes a decade-long distraction from the many issues that need attention here at home.

To succeed—and to give businesses a sense of clear direction when it comes to government thinking—this industrial strategy must be accompanied by a strong domestic policy agenda, which has hitherto been lacking. It must begin by helping places, not just sectors, to unlock their potential. Get these policy choices right, and the UK’s productivity gap will narrow as both firms and places invest confidently and grow.

Brexit Britain: the future of industry is a publication which examines the future of UK manufacturing through the prism of the recently released Industrial Strategy White Paper. The report features contributions from the likes of Greg Clark MP, Miriam Gonzalez, Richard Graham MP and Frances O’Grady.

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