THE BLOG

A Modern Industrial Strategy Works Hand In Glove With Brexit Plans

18/01/2017 15:45 GMT | Updated 18/01/2017 15:45 GMT
Toby Melville / Reuters

With the Prime Minister's vision for a global Britain now clear, the time is right for a modern industrial strategy. Hand in glove with the Government's Brexit response, this strategy will help to build business confidence in an enterprise and trade-led Britain at a time of international uncertainty.

In leaving the EU, we can become a global champion of enterprise and free trade, but we must recognise that Brexit, combined with other world events, has created heightened uncertainty in the short term that requires national economic assumptions and policies to be revisited. The latest Index from the Federation of Small Business has found that while confidence is improving, actual investment intentions remain subdued in the face of an uncertain landscape.

Industrial strategy matters. It is the interface of macro and micro economics. The Government's approach will enable winners to emerge without being picked. Lessons have been learned and there will be no return to 'picking winners', as in the 1970s. We Anglo-Saxon supporters of free enterprise have rightly in recent decades adopted a light touch approach. But we can learn lessons from other countries.

Germany has adopted economy-wide, so-called "horizontal", policies that have defined its post-war market economy and also supports "vertical" measures in key nation-defining sectors. Its automotive sector strategy, for example, brings together government, industry and banks to work in partnership to face the rigours of international competition. There is an emphasis on excellence and relevance in education and training as a key to success, both for school children and in lifelong learning.

In the UK, we should not be shy in developing strategies in industrial sectors where it can deliver positive results. The life science sector is a case in point. The state already has a major interest, with health services being provided by the NHS and Government making significant investments in science. More effectively linking this activity with the 62,000 highly-skilled employees in UK life sciences businesses producing an impressive GVA per head of £300,000, will have positive outcomes for the national economy.

Merely copying the German model would not add to our national competitive advantage, we need an industrial strategy that plays to the UK's unique strengths and our fundamentally different industrial culture. And Brexit must now be a spur to tackle the historic challenges facing the country: modernising our national infrastructure; addressing historically low productivity levels; tackling the skills gap; and redoubling our efforts to secure overseas markets.

The first task has been to reassure markets that Britain is welcoming and remains open for business, and Chancellor Philip Hammond has done just that. Action is being taken on infrastructure projects that cut across the economy, not least on the railways, not least in the North of England, but also on the roads, for passengers and for freight. There is action on skills, investing to deliver millions of quality apprenticeships during this Parliament in fifteen clear, meaningful career paths linked to defined industrial sectors. And there is action on science, that key sector, with an extra £2 billion a year of funding in the Autumn Statement.

Action so far has been a healthy mix of horizontal and sectoral measures that enables the Government to drive forward with determination. The much anticipated Green Paper on industrial strategy, due in the coming weeks, will no doubt build on this work and seek to establish strong links with the 'place-based' sub-regional strategies of Local Enterprise Partnerships and Combined Authorities, with their newly devolved powers. This is a vital step in establishing a comprehensive, more joined-up approach.

The way that our industrial strategy is being shaped is as important as the end result. For the strategy not only to be ambitious but also effective, businesses must be fully engaged. It is good to see Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, taking the lead in developing stronger, more trusting relationships with many companies. Establishing a modern industrial strategy this way creates the clarity we need to counter uncertainty and builds confidence to seize the economic opportunities ahead.