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The eagerly awaited industrial strategy unveiled by the UK government on Monday was meant to be the definitive road map towards a world-beating, wealth creating economy.
After 16 months of reflection by ministers, the judgment being passed on the complex strategy document is that it amounts to a good start — but much still remains to be done to ensure success.
“It has captured what we need to do pretty starkly,” said Terry Scuoler, chief executive of EEF, the trade body for 20,000 British manufacturers. “There are a number of levers that point to the right direction. But some further detail around delivery would be welcome.”
There was no lack of proposals in a document that stretches to 255 pages and whose stated aim is to drive change that will help to close Britain’s persistent productivity gap with competitor nations.
But some industrialists and academics complained that the thicket of old and new funding programmes, lined up with myriad government initiatives, could be confusing.
Dr Craig Berry of the University of Sheffield, a member of the independent Industrial Strategy Commission, hit out at funding initiatives he described as “microscopic compared to the size of the challenge, and the plan for unlocking private investment is under-cooked and, frankly, pitiful”.
On the whole, however, the effort at drawing up a programme for boosting productivity growth and encouraging investment was welcomed. “We will have to see whether it is enough to close the productivity gap,” said Jurgen Maier, chief executive of Siemens UK. “But this is enough at least to start turning it in a positive direction.”
Here are four key challenges raised by the government’s white paper:
UK productivity is today some 20 per cent below the pre-financial crisis trend. Britain remains stubbornly less productive than other developed economies such as France and the US, despite its flexible labour laws and attraction as a destination for overseas investment.
The government’s industrial strategy identifies five foundations of productivity: innovation, people, infrastructure, places and business environment. As part of its effort to drive higher output per hour by workers, the strategy cites a plan to raise total research and development investment to 2.4 per cent of gross domestic product, and proposes more funding for maths and technical teaching as well as for digital infrastructure.
The biggest criticism of the strategy is its failure to address the productivity of small and medium-sized enterprises, where major problems lie, and in the supply chain.
On SMEs the government opted to commission a further review. On the supply chain, there simply had not been enough cash available, said Paul Everitt, head of ADS, an aerospace and defence industry lobby group. The government had not recognised “the scale of the challenge in terms of the competitiveness of the UK supply chain”, he added.
On the other hand, most welcomed the creation of a national industrial strategy council, which will have oversight of implementation of the proposals and be able to hold this and subsequent governments accountable for progress.
A persistent complaint from all sectors of industry is a lack of relevant skills, particularly as an ageing population begins to retire en masse. According to Engineering UK, a lobby group, 1.8m engineers and technicians will be required by 2025.
The government acknowledges the need for an urgent focus on new types of skills, but also on a new way of learning.
Along with increased funding for the stem subjects — science, technology, engineering and mathematics — the government will create a new regulator, the office for students, to address employer and student needs. It also wants to create a new national retraining scheme to support reskilling.
However, some suggested this fell far short of what was needed. Michael Dall, economics director at Barbour ABI, the construction market analysts, said the impact was likely to be muted in his sector given that Brexit would reduce the supply of overseas labour coming into the country.
Ben Willmott, head of public policy at the CIPD, the professional body for human resources and people development, said the level of investment proposed by the government was “inadequate given the scale of the productivity challenge facing the UK. The focus [is] mainly on education policy and the supply of skilled labour for the future in niche sectors”.
3. Digitalisation and technology
The industrial strategy identifies the growth of data and artificial intelligence as major challenges for the economy, but plans to tackle it are limited to a collection of small investments such as £45m for new post graduate degrees in the field and £30m for testing the use of AI in online education.
Although the strategy outlines plans for a new government “office of AI”, it does not specify the funding that will be allocated to the new office. “The government has set the ambition and momentum on AI, but this investment alone won’t be enough for the UK to establish itself as a leader,” said Jon Andrews, head of technology and investments at PwC, the consultancy.
With confusion reigning over the terms of Britain’s exit from the EU, a coherent industrial strategy that will encourage investment is more vital than ever, said industrialists.
Mike Hawes, chief executive of the SMMT, the motor industry trade body, said the measures “will help the UK automotive industry meet some of the many global challenges it faces”.
Others were less sanguine. “Brexit is the elephant in the room,” said one senior automotive industry figure. “Everything else feels irrelevant.”
Josh Hardie, deputy director-general of the CBI, the employers’ organisation, said the industrial strategy marked a “decent first step”. But without a sensible deal on the transition after Britain quits the EU, the strategy would be irrelevant. “For the strategy to work we need a good deal on Brexit,” added Mr Hardie. “There is no point putting your foot to the floor on an industrial strategy while Brexit applies the brakes.”
Additional reporting by Jim Pickard, Peter Campbell, Aliya Ram, Nathalie Thomas and Gill Plimmer