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Back to the future: Industrial Strategy in 2016

After the political earthquakes of June and July, August has given Whitehall’s politicians and civil servants some breathing space to work out what their to-do list will be over the next year. Leaving the EU aside, for the revamped Department for Business, Energy and Industrial Strategy there’s a huge, and potentially very significant task of turning the Prime Minister’s rhetoric of a ‘proper industrial strategy’ into reality.

There’s been plenty of media speculation and comment about what a new ‘Industrial Strategy’ might look like, but very little clarity from ministers. The most contentious points are around whether the Government should protect the future of individual companies or sectors, particularly those that are not faring so well in the face of change. The question of when and how Government should intervene is partly an ideological one, but there’s a lot that could be gained by having an agreed strategy for the economy, regardless of the Government’s preferred choice of intervention.

The version of an industrial strategy that appeals most - a positive, forward looking version - sets out how we create an economy that supports our future, and plans for the jobs that this will provide. It has innovation at its centre, driving growth and productivity. It will require a sense of prioritisation, but also mitigation and planning, using policy levers from across the whole of Government.

Some principles for a new industrial strategy

The new BEIS Minister Greg Clark has set out some early parameters for an industrial strategy:

  • that we should take a long-term, predictable and sustained approach to policy making

  • that we should recognise that our government should be actively engaged in promoting, and also defending, those things that contribute to a successful environment in which businesses can be founded, can expand and can prosper

  • a strategy makes connections between what might otherwise be disparate forces. Aligning them, rather than leaving them isolated or even opposed – between government policy and business decisions, between government departments, between industries and places, between research and practice

  • that we should be aware of and capitalise on our strengths while constantly seeking new opportunities that, together, will determine how we make our way in the world

This is a sensible and fairly uncontroversial place to start. But there’s a huge opportunity to be more ambitious. We would add:
 

  • It should be based on a vision for the UK economy with innovation at its heart. Before the summer, BIS was already working on a National Innovation Plan, and there’s a great opportunity to place this work within the wider context of a new industrial strategy. Innovation is the prime source of industrial productivity, and it is what makes businesses sustainably competitive: good industrial policy is good innovation policy, and vice versa.
     

  • It should be based on a sophisticated understanding of the strengths and future direction of the UK economy. In order to understand these new, emerging sectors we will need to upgrade the way we use statistics and data, and utilise new sources and techniques. Nesta has long advocated for better use of evidence and data in policy-making. Creating a new industrial strategy is an ideal time to rethink how data is being used to make policy decisions. Government already has the capacity to do some of this, and we’ve previously suggested how the creation of a ‘strategic brain’ at the heart of Government could be organised.
     

  • It should acknowledge, and start to mitigate, the challenges of a forward-looking industrial strategy, explicitly recognising that the process of change will result in winners and losers. If industrial strategy becomes primarily about saving declining industries, we will be needlessly repeating the errors of the 1970s. It should set out a plan for the impact of our shifting priorities, from the potential loss of companies and industries, to changes in job types and skills, and how this will affect places and communities across the country. This type of long-term planning will take a cross-Government approach that addresses how we prepare young people for the jobs of the future, and reskill the existing workforce. It will need to involve all levels of Government to develop plans for communities, and could include more innovative policies like community currencies and mutual aid.
     

  • It should engage and excite the public about the benefits of innovation, starting an honest discussion about the risks and drawbacks. New and disruptive technologies can be controversial but Nesta research showed that the majority of the UK population are positive about innovation, and in particular the societal benefits that it can bring. We shouldn’t shy away from involving the public in this conversation.
     

Over the course of the next two months, I (with some Nesta colleagues) will be looking at some of the big questions related to this approach to industrial strategy, drawing on Nesta’s previous work on innovation policy.

For example, we will be looking at how current Government innovation policy could support industrial strategy, including the balance between direct grants and indirect instruments like tax credits. We’ll be debating how the Government could be better equipped to design and implement this industrial strategy, particularly in the face of changes to research and innovation through the creation of UKRI.

There is no doubt that BEIS will face some major challenges over the coming months, but creating an industrial strategy focused on the long-term future of our economy is an exciting opportunity for anyone who considers innovation as our key to long-term growth.
 

With thanks to Louise Marston, Stian Westlake, Andy Stevenson and Alex Glennie for their thoughts and comments.

Photo: George Evans, Creative Commons Attribution ShareAlike 2.0

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Jen Rae

Jen Rae

Jen Rae

Head of UK Innovation Policy at Nesta

Jen Rae is a policy advisor on innovation and economic growth for Nesta’s Policy and Research team. She is responsible for producing evidence-based policy from Nesta’s wide range of ...

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