Collaboration looks set to power delivery of forthcoming Industrial Strategy

An update from the Department for Business and Trade (DBT) shows direction for the coming White Paper.

In what already feels like a lifetime ago, the Government published the green paper for its new industrial strategy – Invest 2035– last November. This marked a significant moment, and a return to industrial policy following departure from Theresa May’s 2017 Industrial Strategy under Boris Johnson’s conservative government.

The green paper was reasonably high-level, presenting the Government’s rationale for a new industrial strategy and offering some indications on how it would go about delivering on the strategy’s goals.

In the paper, we learnt the eight broad sectors that would be prioritised (broad being the operative word here). Each sector will be supported by a specific plan. The priority sectors were:

Advanced manufacturing
Defence

Creative industries

Financial services

Professional and business services

Clean energy industries

Digital and technologies

Life sciences

The Invest 2035 green paper was an opportunity for stakeholders to submit their views on the direction of travel, and by all indications many took this chance – the Government says it received responses from more than 3,000 organisations and individuals. NCUB was one of them, and our response centred on the need to embed university-business collaboration to successfully deliver the industrial strategy. We’ve also been in active discussions with members of the Industrial Strategy Advisory Council to advise on the next steps for the new industrial strategy, and feed in the vital perspective of both universities and businesses.

Public R&D investment is at record highs, and NCUB analysis has demonstrated the positive leverage effect this has on private R&D spending. However, business investment in R&D has declined 6% between 2021 and 2023. Something is not working as it should, and the Government will need to address the barriers holding back companies from investing if it is to make a success of the industrial strategy.

We highlighted these barriers in our response to the consultation, including companies’ access to finance, a lack of expertise and skills, and an overly complex public R&D ecosystem, which all act as barriers to investment. We also strongly emphasised the importance of university-business collaboration.

Universities support economic and productivity growth in a myriad of ways, be that through R&D, commercialisation, or skills development (to name a few). They collaborate with businesses to undertake research, providing their own expertise and access to vital infrastructure. Industry insights to academia are vital to aligning research to priority areas.

Nevertheless, we raised the significant headwinds facing universities and their ability to collaborate with industry, citing the impact this could have on the ability to drive the industrial strategy. A long-term solution to the financial challenges that higher education faces will be needed to grasp the full potential of the industrial strategy.

We also emphasised the importance of making it easier for companies, particularly SMEs, to navigate the public R&D and innovation ecosystem. Whilst recognising that this will not happen overnight, the industrial strategy can and should articulate a clear aim around which the publicly funded components of the innovation system could be focussed. This joint aim should be purposely designed to help businesses succeed in a changing global market.

Our response was over 30 pages in length, so I won’t cover every detail in this blog – you can find the full submission here.

Consultation calls for greater collaboration between businesses and academia

The Government has now shared a synthesis of the responses they have received, and many of the points align with NCUB’s.

Access to external finance and government funding were frequently cited as key needs by respondents to the consultation. It was felt that high costs of borrowing and other barriers are putting off businesses, particularly SMEs, from accessing finance. This is coupled with a lack of risk appetite from lenders.

This limited access to finance is holding back innovation, with the responses calling for improved patient capital to support companies in innovating and adopting new technologies. Innovation is also held back by the regulatory environment, as businesses reported that regulatory complexity, uncertainty and capacity constraints at some regulators lead to delays and increase costs, hamstringing business growth.

Submissions to the consultation highlighted skills shortages as a barrier to growth and the need to address the mismatch between education outputs and industry needs. The Government heard that productivity could be boosted by 5% if the UK can reduce these levels of mismatch, which were seen across all of the key industrial strategy sectors. Other key points raised in the consultation responses include upgrading and adding to the UK’s ageing infrastructure, and a need for place-based growth policies.

Responses emphasised that national priorities should align with the local Growth Plans of Mayoral Combined Authorities and the devolved nations, as well as other local government structures.

In a welcome statement, the Government has acknowledged that more work needs to be done to increase collaboration between industry and academia in order to bridge the gap between research and commercialisation. Improved collaboration with international partners on standards, R&D, innovation, and trade were all highlighted in the responses to the consultation. There is also a call for a more streamlined, transparent and collaborative partnership between industry and government, as issues of poor public communication and lack of government clarity were cited as barriers to growth.

What’s next for the industrial strategy?

In short, it seems that the responses to the consultation have covered many of the key issues NCUB raised in our submission. In terms of next steps, the focus through to April will be on detailed policy design. The Government has said it is focussing on regulation, skills and access to talent, lending facilities, and the role of public finance institutions. The individual plans for each of the sectors are being developed by nominated departmental leads, with the Industrial Strategy Advisory Council in place to review the overall strategy and ensure it meets the objectives of regional and national economic growth.

The full industrial strategy will be published alongside the multiyear spending review, which is expected to be launched in mid-June. Long-term implementation of the industrial strategy, with monitoring and evaluation by the Industrial Strategy Advisory Council, will then commence.

As I mentioned, NCUB has been in dialogue with members of the Industrial Strategy Advisory Council. In these discussions we have continued to share the perspectives of our members across the university and business sector, and feed our recommendations directly into the Council for delivering the industrial strategy. NCUB has three active workstreams that all link closely to this work. These are: