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Is it too much to hope that the UK’s haphazard approach to industrial policymaking has passed its low point? It is hard to see how the chopping and changing between a hodgepodge of different plans (and the lack of them) could become much worse.
Think-tank IPPR reckons the UK has had 11 industrial strategies or growth plans in the 13 years since 2010. If anything, that seems generous — the 2017 industrial strategy, the last serious attempt at an overarching framework of priorities for the UK economy, was canned in 2021. The proliferation of often lightweight “strategies” across government since then has been baffling — not least because of the lack of any obvious joined-up thinking or co-ordinating force behind them.
This isn’t a new problem. Lack of consistency and co-ordination in industrial policy is part of the UK economic fabric at this stage, right alongside the tendency to invest less than competitor nations. The resistance to “picking winners”, the outdated idea that industrial strategy must mean anointing individual companies to be champions worthy of government largesse, has resulted in failing to pick anything at all. That looks increasingly out of step with the focus (let alone the money) of the US Inflation Reduction Act and the EU’s Green Deal.
As Jeremy Hunt, the sixth chancellor since 2016, stood up to give his Autumn Statement, there were signs of change. For a start, this was a serious attempt to bolster the UK’s longstanding lacklustre record on investment. Making permanent the tax break allowing businesses to deduct 100 per cent of plant and machinery costs upfront from their taxable profits aligns policy with the long-term planning of companies and catapults the UK towards the head of the pack in terms of OECD capital allowances, where it has previously trailed.
The next step is to be specific about where the government wants to see investment and create regulation that encourages it. Hunt had already tilted back towards the notion of industrial policy, highlighting his five “key growth sectors”. Three of these — life sciences, advanced manufacturing and creative industries — have been lifted from the 2017 strategy, which was dismissed as a “pudding without a theme” by his predecessor as chancellor.
Such echoes are a good thing. The point of decent industrial strategy is that groups as diverse as today’s Conservative leaders and the Tory cabinet of five years ago should agree it is, broadly, pointing in the right direction. Better still, if the next government and those of the future are likely to agree — something that seems possible given Labour’s inclination towards full expensing and green-focused investment.
The government has started to home in on its five areas. The £4.5bn five-year manufacturing package announced last week (with precious few details) to some extent just dusted off and expanded ideas from 2017, such as the Made Smarter programme to encourage small manufacturers to invest in digital techniques and the grants for advanced medicines manufacturing.
True, in an increasingly competitive world for this investment, this is just money on a promise, with funds only from 2025. But the UK won’t be able to compete with bigger rivals in throwing subsidies around regardless.
What’s missing is a sense of clever policy being trained upon selected areas where the country can really compete. The government still isn’t above defensively chucking money at companies to stop bad stuff happening — see Tata’s Somerset gigafactory or subsidies for the steel sector. Better long-term plans and quick deployment of tools such as contracts for difference or advanced market commitments are needed elsewhere in spades. Indeed, the chancellor said international investors felt “longer-term strategy” was the “biggest thing” needed in advanced manufacturing and green energy, pledging to publish those plans “today”. Hours later they were nowhere to be found.
The creation of an overarching body as part of those plans — such as the Industrial Strategy Council axed in 2021 — could help credibility by evaluating progress and suggesting ways to replicate successes in other areas. The legacy of the churn of recent years is that businesses, quite reasonably, doubt the staying power of what is said today.
Whatever Hunt and his colleagues prefer to call it, industrial strategy is back — certainly globally and increasingly in the UK. The question is whether the UK can manage to do it properly.
