Wanted: a long-term strategy for UK business

Does the UK still have an industrial strategy? Even those unfortunate enough to read the 256-page white paper produced in 2017 would struggle to explain what it is — and indeed did at the time.

Now it seems the whole notion is out of favour. The phrase did not get a mention in last week’s Budget. A promised “refresh” became a Plan for Growth. That’s being presented as a like-for-like swap, but is Whitehall code for a collection of initiatives led by Treasury rather than a longer-term road map produced by the business (and industrial strategy) department.

The Industrial Strategy Council set up in 2018, and chaired by Bank of England chief economist Andy Haldane, is being disbanded.

Business secretary Kwasi Kwarteng in January said he wanted to “focus and direct” industrial strategy but, in conceding the territory to the Treasury, seems to have jettisoned the thing instead.

That is misguided. A Conservative administration newly signed up to the merits of economic intervention could do with some clear priorities and guiding principles. That would help business, reeling from Brexit and the Covid-19 crisis, to discern a meaningful sense of direction too.

The 2017 effort under Theresa May acknowledged that, after a decades-long hands-off approach, the state should do more in shaping the UK’s economic success and ensuring its benefits are shared.

One problem has been that — hard work and best intentions aside — it just was not terribly good. Decent industrial strategy, says one old hand, should be able to be summarised in three tweets. (It is a standard that the Germans, recognised leaders in the strategising game, meet with ease.)

In contrast, the UK’s attempt was unwieldy: it had five economic foundations, four “Grand Challenges” and four sector deals, promised as just the start of the bargain striking between government and industries. The green paper launching the strategy made a commitment to review 28 separate areas of government policy, notes Giles Wilkes at the Institute for Government. The overall impression was not of clear priorities or a plan for how those would be achieved.

A subsequent failing was its lack of sticking power. Good industrial strategy endures, through changes of minister, and government. It is reinforced and embedded through governance and institutions (like the ditched council) that means it becomes part of the furniture. 

Yes, as Kwarteng said, rather a lot has happened since 2017. But many of the UK’s broader economic challenges remain the same. And it did not take a pandemic to throw the UK’s industrial strategy off course. The overriding ideology of Brexit took care of that.

By the beginning of last year, the government was batting away concerns about the direction of Brexit negotiations as lobbying from industries “in secular decline”. Those hopeless cases included the likes of automotive, pharma and aerospace — dubbed strengths and bestowed with favours under the policy published just two years before.

Industrial strategy, rather like state aid rules, should be helpful for an interventionist government trying to make difficult choices about where to direct support and attention.

The country admittedly remains in emergency mode fighting the pandemic. But the budget was noticeably quiet on longer-term necessities such as the transition to net zero and handling an ageing population — both captured under the 2017 Grand Challenges.

The government — whether because it wants to look busy after Brexit, or because of the economic challenge and interventionist license thrown up by coronavirus — is sending out pseudo-strategy signals left, right and centre. Levelling Up! Global Britain! Build Back Better! Fintech! Freeports! 

What is missing is a coherent, focused framework — and now the rigour and consistency of independent oversight and analysis. Short-term growth tactics and political marketing are not the same as considered strategy designed to last decades, and will not pull in the same private sector investment behind them.

Let us put it in terms that a government fixated on technology might understand: industrial strategy always needed more than a refresh. It should get a total reboot.

helen.thomas@ft.com
@helentbiz