New Industrial Strategy is an excellent start – but it needs sticking power to deliver growth

Just like the smoker who says he is good at giving-up smoking because he’s done it so many times, so Britain is good at Industrial Strategy – we’ve had lots of them. This White Paper is an excellent addition to the canon of serious exercises from the likes of Michael Heseltine, Peter Mandelson, Vince Cable and Greg Clark. It really will stand out if it lasts – though this is a barrier that many previous strategies have failed to clear.

The initial signs are good. It clearly has support across Government and, exceptionally, from the Treasury which usually plays the role of the half-hearted sceptic. Instead, this time it is recognising that smart Industrial Strategy is key to the Chancellor’s growth mission and is whole-heartedly engaging with the financial instruments at its disposal with for example big roles for the British Business Bank and the National Wealth Fund.

It’s inevitably hard to pin an industrial strategy down to one catchy headline. The big news today is the announcement on bringing down electricity prices for heavy business users. This has obviously been welcomed by industry, though it does raise the question of who is paying for this reduction in levies. The answer is not explicit in the White Paper – and it will be one that business and taxpayers/consumers will be keen to know too.

Underpinning this White Paper is a coherent account of the role of Government as a key bearer of risk. We beat up on ourselves that for some cultural reason our businesses lack an American appetite for risk. But behind the Jeffersonian rhetoric of sturdy individualism, America is a Hamiltonian state funding new technologies and business on an enormous scale with grants, military contracts, and requirements that Government contracts support small business. The Federal Government, defence agencies and the states bear a lot of risk and so should they in the UK. I hope this White Paper empowers us to do so, recognising that not every risky judgement works out. If it did, it wouldn’t be risk.

Promoting clusters is also key. They are low risk environments for high-risk activities: there is a diverse group of players so that if you lose your job there is a decent chance of another one in the area. Promoting radial transport links into big cities is key to these benefits of agglomeration. We argued for these in our Economy 2030 Inquiry and it is good to see such transport investment a strong theme in the White Paper.

As well as all the Whitehall text listing lots of initiatives, the White Paper also has some excellent clear summary illustrations which I recommend to the busy reader as the most vivid account of this Industrial Strategy.

So, for example, pages 106-108 offer a great account of some of our clusters across the country.  It shows that we have distinctive strengths across the country. This balances the understandable focus on the Oxford-Cambridge arc.

We are not supposed to think of innovation as a linear process but often it is, starting with research in the lab and ending up with serious businesses scaling up. The chart on page 52, with the unglamorous heading Public Financial Institutions is a vivid account of how public funding should be available at each stage of this process. We’ve been trying to line these up for years and are closer to delivering it than ever before. But of course, that is not the end of the story. The potential financial support set out here needs to be reinforced with much smarter public procurement; just possibly the implementation of the last Government’s new procurement legislation can make that happen at last.

Governments can’t do everything and shouldn’t try to. There are also many businesses which want to be left alone. So priorities matter. The visual of Growth-driving sectors and Frontier industries on page 116 is a clear account of priorities. It could and should change over time but it is refreshing to have it laid out so vividly.

Most of the key industries set out in that visual are heavy users of higher education. Universities will play a crucial role in the strategy. One of the biggest risks to delivering it is the financial fragility of these core institutions. It is good to see them getting a vivid illustration as well – on page 73. But the Government has not yet taken the decisions needed to ensure they can thrive and continue to be such a national asset.

Another news focus of the Industrial Strategy has been on bringing more SMEs into the eight industrial sectors it prioritises – advanced manufacturing, defence, clean energy, digital and technology, creatives, financial services, life sciences and professional and business services (or “the IS-8” to use the new Whitehall lingo).

Governments love small companies. Many of them, however admirable, are not on any ambitious growth path. The Industrial Strategy should instead focus on the special group of young rapidly growing companies. They are key to our becoming a more dynamic economy less dependent on big incumbents. These “gazelle” companies face the scale-up challenge which is referred to in the White Paper. Serious follow-up action is needed for them meet that challenge

This White Paper is an excellent start. The task now is implementation in all the day-to-day decisions of Government. That is why it is also very welcome that Greg Clark’s Industrial Strategy Advisory Council, so stupidly abolished, is coming back. Its job must be to monitor and advise on delivery of these ambitious plans.