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Britain’s Prime Minister Sir Keir Starmer may have hoped for a more enthusiastic reaction to the long-awaited launch of his government’s industrial strategy on Monday. But it has been overtaken by other events this week, from developments in the Middle East, to a mounting rebellion from his own party over a proposal to cut welfare payments, which risks undermining his premiership.
Still, the 160-page document marks an important moment for Britain’s economy. It identifies eight priority sectors including advanced manufacturing, life sciences and financial services. They encompass Britain’s existing strengths, future-facing industries, and national security, making them a sensible base for the government to focus its policies and investment. The clear direction will give businesses and investors confidence to make long-term decisions — a welcome change after years of political upheaval.
Writing an economic blueprint is, however, far easier than actually delivering one. In the past two decades alone there have been at least 10 major government growth plans, including former Prime Minister Theresa May’s 2017 industrial strategy. Each has had a limited impact beyond leaving behind a hodgepodge of public bodies and funding pots. How can Labour’s industrial strategy have a longer-lasting effect?
First it should focus on removing obstacles to the private sector. Prior strategies have relied too heavily on driving growth by dishing out public funds to industries and regions. By failing to improve underlying business conditions, this has been wasteful. Labour’s industrial strategy is more promising on this front. It reiterates efforts to speed up planning processes and expand access to training courses. The infrastructure strategy, released last week, promises to improve road, rail and grid connections. On Thursday, the government unveiled a trade strategy, helpfully targeted towards cutting red-tape for exporters.
But the industrial strategy is too light on energy costs, tax reform and immediate skills shortages, which are significant bugbears for business. The UK has the highest industrial electricity prices in the developed world. The government’s main solution is to provide costly subsidies to energy-intensive companies, which will only kick in after a two-year consultation period. Disincentives to private investment in the tax system get little mention. And the strategy offers only a small fund to help attract global talent from abroad.
Second, the government must ensure that public funds channelled to its eight priority sectors are used well. Under Labour’s plan, several government institutions — including the National Wealth Fund, UK Export Finance and the British Business Bank — are tasked with making billions of pounds in cornerstone investments. They must have the expertise, independence, and accountability to ensure spending is additive and crowds in further private funds.
Third, a surfeit of committees and funding pots have often created confusion and hindered the take-up of policy initiatives. The lines of responsibility between its various councils, agencies and regulatory bodies must be clear. A concierge service, through the Office for Investment, aims to help investors navigate the raft of public funding opportunities and is a step in the right direction.
Sharpening what is in its industrial strategy is still no guarantee of higher growth. Labour needs its wider agenda to align with its ambitions. By raising taxes on employers and proposing costly provisions in its workers’ rights bill it is burdening businesses. A climbdown on cost-saving welfare cuts would also raise the prospect of further tax increases. The fortunes of private enterprises — whether part of the government’s eight core sectors or not — are connected through supply chains. Having a set of industrial priorities is helpful, but what matters most for growth is an environment that lifts all businesses.