Three years on, what can we expect next for the Industrial Strategy?

The Business, Energy and Industrial Strategy Select Committee launched an inquiry into post-pandemic economic growth, with a sub-inquiry into the Industrial Strategy. The call for evidence focused on whether the impact of Covid-19 has shifted the strategic building blocks of the Industrial Strategy.

We consulted members to ensure we fully represented your views, and with this feedback and input we submitted a response. The CBI’s Chief Economist Rain Newton-Smith also provided oral evidence to the committee.

Our submission does not advocate for a radical and wholesale re-imagining of the Industrial Strategy, and instead focuses on urgent action. Key points include:

• The fundamental building blocks of the Industrial Strategy remain the right ones for the UK’s long- term competitiveness, but the challenges facing the UK economy as a result of the Covid-19 crisis put an emphasis on urgency and pace of delivery
• Businesses and international investors are looking for a bold vision for the UK, which the Industrial Strategy can help to provide, pointing to areas where the UK can lead on the global stage in areas such as clean growth, life sciences and AI and data
• Grand Challenges should sit at the heart of the Industrial Strategy, with each challenge having a clear goal akin to ‘net zero by 2050’ to inspire action. Research and innovation will underpin progress on the challenges so it’s important that the Industrial Strategy is closely aligned with government’s developing R&D strategy
• Sector deals remain critically important. They should build on the work already underway but they must be adapted to reflect the specific challenges facing individual sectors to ensure the UK retains capability in its many world-beating sectors as they recover from the Covid-19 crisis.

During the oral evidence session, Rain Newton-Smith emphasised:

• The need for transitioning to net zero and our existing comparative advantage in the technologies to facilitate this, the potential in the services, and the necessity of manufacturing and supply chain resilience
• The importance of not stepping away from needed investments, businesses across all sectors need government to provide certainty so they can invest for the future, including in adult retraining and digital technology adoption
• The role for the Industrial Strategy in getting joined-up thinking across different government departments and regulators.

Earlier this year, the independent Industrial Strategy Council published their first annual report, and they believe that a successful Industrial Strategy requires longevity, scale, and co-ordination. Key policy areas include tackling ‘mega trends’ through the Grand Challenges; addressing regional disparities through Local Industrial Strategies; addressing the future skills challenge; the role of the British Business Bank in supporting the provision of SME finance; and commitment to R&D investment and contribution of the Industrial Strategy Challenge Fund. However, the government isn’t compelled to act upon the council’s conclusions and it’s not clear whether they will influence the government’s thinking regarding the strategy’s future direction.

Covid-19 provides an opportunity to build back better

The pandemic provides an opportunity to take stock of what the Industrial Strategy has achieved already and set out how it can more quickly be implemented in the future. The unprecedented economic shock means it’s appropriate to revisit elements of the Industrial Strategy. Short-term policy may need to adjust to account for high unemployment because of the pandemic, however, longer term ambitions linked to the strategy’s foundations remain pertinent.

The CBI believes renewed focus on vision, partnership and implementation is urgently needed. By quickly applying lessons from the past couple of years, we can ensure the UK recovers as quickly as possible while tackling regional inequalities and leading the way on the global stage on issues like clean growth.

Any revamp to the Industrial Strategy should reflect the key principles of building back better, including a sustainable and green recovery, the creation of green jobs, mass energy efficiency programmes and building new sustainable transport infrastructure. There must also be a focus on skill-building and opportunities for young people. This focus should help kick-start demand and unleash competitiveness.

Clarity is needed for local and devolved areas

Local Industrial Strategies were in the midst of being published before the pandemic. They set out a local area’s priorities and opportunities for growth and development. Seven have been published so far including the West Midlands Combined Authority, Greater Manchester Combined Authority and West of England of Combined Authority.

In the CBI’s report All together now, we called for all parts of the country to have a Local Industrial Strategy in place by summer 2020, an aim echoed by the Industrial Strategy Council. However, this target has not been met, and many Local Enterprise Partnerships and combined authorities are now instead using their draft Local Industrial Strategies to aid recovery and revival planning. Economic recovery plans are being completed by local areas, but the form these take varies from place to place. Whether or not strategies which had local sign off but had not been signed off by central government will ever see the light of day remains unclear, and more government guidance is needed on the requirements of economic recovery plans.

If you are interested in finding out what is going on at the local level check out our monthly update on regional growth and recovery.

Another complication is the lack of a joined-up approach with the devolved nations. Although the Industrial Strategy was supposed to be UK wide the devolved administrations in Scotland, Wales and Northern Ireland have pursued their own independent strategies, to varying degrees. The strategy must encourage inclusive growth in all regions, and now is the time for true partnership and strong collaboration UK wide.

You can read our full submission below and for more information on this issue, or to learn how you can contribute to any future interventions on this topic, please contact Helena Coe.