By James Tout on 4 April 2017
Should you respond to the government’s industrial strategy, and how?
Few would argue with the basic premise that Britain could use an industrial strategy right now.
With Brexit an irreversible fact following the invoking of Article 50, we’re entering into the most uncertain period economically in our peacetime history. Simultaneously, there’s stronger political recognition than ever of the need for ‘inclusive growth’ to combat the destabilising effects of inter-regional inequality which was arguably the referendum’s starkest message.
But with just a couple of weeks to go until the end of the government’s consultation period on its Industrial Strategy Green Paper, you could be forgiven for hardly noticing that views were being sought. And you wouldn’t be alone – a recent survey by bank Aldermore has revealed that fewer than three in ten (29%) small and medium-sized enterprises (SMEs) had even heard about it. And of those that have, only two in five (38%) think it will have a positive impact on their business.
Clearly, there’s a disconnect between the apparent importance government attaches to the green paper and the emphasis it’s put on communicating this to those at the economic coalface. A cursory glance on social media brings up only bland exhortations to hurry up and respond, with no obvious thought given to the audiences that answers their main concern: why?
It perhaps hasn’t helped that right from its very launch back in January, many dismissed the document as little more than a wish-list full of vague aspirations, bereft of significant new funding.
These criticisms are valid in many ways, but the government has a fine line to walk on this score. The very term ‘industrial strategy’ conjures up images of the 1970s and trying to ‘back winners’ like the ill-fated carmaker British Leyland. And industry, if we take this to mean manufacturing, now accounts for just 10% of our GDP as the modern British economy has diversified. The terminology is tainted.
Recognising this, Secretary of State Greg Clark has insisted that this 21st century strategy is all about “creating the right conditions for new and growing enterprise to thrive, not protecting the position of incumbents”.
So the 10 ‘pillars’ of the industrial strategy focus heavily on skills, innovation, investment in R&D and infrastructure, as well as supporting sectors such as electric cars seen as having future promise.
P for Productivity (problem)
The green paper is abundantly clear on why action is needed. Since the 2008 crash, our productivity has flatlined and compares extremely poorly with most major competitors – we’re 18 percentage points lower than the rest of the G7 and even further behind leading nations such as the US and Germany.
What’s more, labour productivity (GVA per hour worked) varies hugely across the country. While London’s rate is 30% higher than the UK average, most of our other major city-regions are actually below average.
The newly published UK Local Growth Dashboard 2017 from the Enterprise Research Centre, based at Aston University and the University of Warwick, provides a bit more granularity to the situation. It highlights that while we fare pretty well in terms of the absolute numbers of start-ups taking the plunge, only a small proportion of firms manage to scale. It’s this group of scaling companies – often also the innovators and exporters the UK badly needs right now – that are going to crack our productivity conundrum.
But the Dashboard highlights how far we’ve got to go. In fact, the number of OECD-defined ‘high growth firms’ across the UK actually fell over the latest three-year period (2013/16), from 11,855 to 10,865. While these firms account for just a small fraction of all firms of 10+ employees (about 6%), they create around a third of all net new jobs.
A key message that comes through is the importance of place. Growth and job creation are unevenly spread – with clusters of scale-ups in the North-West and Midlands as well as the London area.
How and why to respond?
This emphasis on places – leveraging the unique sectoral strengths of a defined geographical region while also recognising the challenges that need to be overcome – is central to the industrial strategy green paper.
So smart organisations would do well to use this to their advantage. While enthusiasm for English regional devolution may have cooled since George Osborne’s ejection from government, the genie can’t be put back in the bottle. Elections for the new breed of metro mayors are just a month away and the Combined Authorities they will head look set to take an increasingly strategic view of the growth levers at their disposal, cutting across existing local authority and LEP boundaries.
Assisting this process are nimble firms like Metro Dynamics, overthrowing the dominance of the big consultancies with an offer that sees city growth resting squarely on solid analytics, so that leaders and investors have the depth of understanding about how the assets of their places – companies, institutions, infrastructure, people – can interact more successfully to boost GVA.
And in the fragmented enterprise ecosystem, there’s a real opportunity to show leadership with responses to the green paper. Universities, in particular, are key players here. The strategy recognises their increasingly important roles as hotbeds of innovation for whole regions, with commercial research spin-outs and industry collaborations providing the best hope of turning the UK into a hi-tech leader capable of matching the likes of South Korea, Japan or the Netherlands.
Aston University, for instance, has coordinated a response on behalf of eight industry and regional policy experts, with automotive industry expert Professor David Bailey setting out a five-point ‘call to action’ articulating in clear and simple terms what the government ought to prioritise. Founded as a technical college in the 19th century and with a continued emphasis on real-world industry partnerships to this day (over 75% of students do a placement year in the workplace as part of their course), Aston is exactly the kind of institution the government should be regarding as an exemplar.
So while the green paper may have been fairly light on detail, this creates space for organisations getting on with the task of joining the dots at the local level to set the national agenda. With few preconceptions on the part of the government or independent Industrial Strategy Commission, headed by Dame Kate Barker, now is the time to highlight what you’re doing, how it’s working and how it could be replicated more widely.
Clarity – of thought and language – is critical. With thousands of responses likely, the ability to put forward a compelling case in plain English and backed with a solid evidence base of the need for targeted government support should be paramount for any organisation that has a stake in the UK becoming a more enterprising nation.
The Department of Business, Energy and Industrial Strategy (BEIS) has created an online portal for responses to the industrial strategy green paper here.