Harry and Megan had stiff competition for the headlines on 27 November. They announced their engagement on the same day the Government published the first industrial strategy since…well, since Vince Cable’s industrial strategy a few years ago. Thankfully, the happy event captured some good press coverage.
Industrial strategies come along quite regularly. The Foundation for Science and Technology published a ‘cartography’ of government strategies, white papers and policy reviews stretching back to the middle of the 20th century. There are dozens of them with hundreds of recommendations and policies. These documents seem to have appeared with higher frequency during the last 20 years.
The same themes come up over and over again: STEM skills, commercialising science, improving productivity, supporting SMEs, improving infrastructure and so on. Government strategies are easy to find: evidence of persistent impact on the UK economy is somewhat more elusive.
This time it looks different
There are signs that this industrial strategy might be different from anything we have seen in the last 50 years.
- First, this strategy has the unique imperative of Brexit. As the Prime Minister puts it in the introduction to the document: ‘As we leave the EU …we will build a Britain fit for the future’. This strategy stands out from its predecessors in its level of boldness and urgency – direct consequences of the pressure of Brexit
- Second, this strategy is underpinned by substantial new investments in research and innovation – an uplift of £2.3bn pa within the next few years and by related investments in measures designed to address the UK’s low level of productivity and high level of regional disparity. The strategy re-iterates the Conservatives’ manifesto commitment to lift overall UK investment in R&D to 2.4% of GDP by 2027 – a move that would at last bring the UK up to the level of our international peers, but which would require a huge uplift in business investment. Plans for delivering that commitment will no doubt take shape next year.
- Third, the Government is putting in place arrangements to actually deliver the strategy. The Prime Minister has already established a Cabinet Committee to oversee the delivery but there are also plans to create an independent Industrial Strategy Council to assess progress and make recommendations to Government. There are no signs yet how this Council will be appointed, who will chair it or to whom it will be accountable. Ideally it would have statutory independence and authority – ensuring that Parliament rather than Government determines its role – but even if that does not happen, at least it exists.
The geographic coverage of this strategy is ambiguous, reflecting the complicated patchwork of policy responsibilities arising from devolution settlements. Higher education policy is devolved to Scotland, Wales and Northern Ireland. Science and Research policy is UK-wide. Infrastructure, skills, the NHS (a vital part of the life sciences strategy) are devolved while fiscal policy is largely UK-wide.
Devolution to city regions adds further dimensions. There is clear recognition of the distinctive interests of devolved Governments and emphasis on the importance of place, but less signs of how these interests will be aligned in a coherent strategy.
Scaling up businesses
Alongside the industrial strategy, Government – the Treasury, to be more precise – published the first results of its work on access to finance for growing businesses in the UK. It includes recommendations from Sir Damon Buffini’s ‘Patient Capital Review’ and follows the Treasury’s recent consultation of ‘Financing Growth in Innovative Firms’. These are well-established topics in the policy landscape but the package of announcements this time looks bold by comparison to previous efforts.
One part of the package claims to ‘unlock over £20 billion to finance growth in innovative firms’. That is a great headline message but the detail is complicated: the £20bn is over a period of ten years and includes promises to attract a large proportion of the money from unspecified private sector sources.
According to the Government, some £2 trillion are invested in UK defined contribution pension funds with inherently long time horizons. The Treasury has announced that ‘the Pensions Regulator will clarify guidance on how trustees can invest in assets with long-term investment horizons …This will give pension funds the confidence to invest in innovative firms as part of a diverse portfolio’. The Treasury is creating a working group of investors and fund managers to unlock this sort of patient capital and we may see a consultation next year. This is welcomed. It would be even better if the group included a few members from the research and innovation community whose commercial ambitions could be targets for such investment.
A curious feature
One curious feature of the UK is that we have one of the world’s strongest research communities and one of the world’s largest and most innovative financial communities but we can’t get them to interact effectively. The UK is a good place to start a business. The quantity and quality of UK university spin-out companies stands comparison with the best in the world. But the UK is less successful in growing corporate giants from those promising starts.
It doesn’t need to be that way. The Government’s latest initiatives on patient capital and industrial strategy create opportunities for investors, business leaders and universities to come together in a new marriage that – like all good relationships – works for all.