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The death of the Industrial Strategy Council is a positive step
Last week, the UK Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng, announced the dissolution of his department’s Industrial Strategy Council – a group of business leaders the government would tap for advice and ask to monitor government performance.
The news was greeted with some dismay by industry bodies and commentators, who fear the Conservatives are losing interest in industrial strategy. The RSA’s Matthew Taylor called it a “sad and bad” decision, while Make UK described the news as “frustrating.”
But, putting aside the debate about the efficacy of industrial strategy, are the critics’ concerns valid?
All the signals from government suggest it has embraced an increasingly interventionist agenda. Brexit created both the opportunity and the need for new thinking, while the success of the JCVI in building public-private partnerships to deliver the rapid development and roll-out of Britain’s vaccine programme has provided a template for future intervention.
In the last few months, the government has unveiled plans for a Net-Zero Innovation Fund, agreed to bankroll the Advanced Research & Intervention Agency, confirmed plans for freeports across the country and shelled out £400m for a bankrupt satellite company. This not the behaviour of a laissez-faire state.
So when the government is seeking to direct so much private sector activity, why shut down its primary business sounding board? A quick glance at the Council’s membership suggests the answer.
The ISC was comprised of 16 leaders from business, academia and trade unionism. All brilliant, accomplished individuals in their own right, but as a collective, not the right blend of people to help reimagine Britain’s economic model.
Our terms of trade with our largest economic partner have just been radically re-written and we have begun to decouple from China. The UK’s economy has been decimated thanks to Covid, and the resulting lockdown produced a decade’s digital transformation in a single year. While the UK has made more progress on decarbonising its economy than any other major power, the challenge of achieving Net Zero is huge.
Any industrial strategy worth having must be designed to respond to these challenges and deliver a step change in Global Britain’s growth potential. The ISC panel had no-one from Britain’s tech or biotech sectors, no major exporters and it had more retailers than manufacturers.
If you were designing a panel to help Britain navigate the challenges of the next decade, it would look very different.
– Firstly, you’d want to hear from major manufacturers that compete and win in high-value sectors, employing Brits in the tens of thousands, supporting local supply chains and exporting most of what they do. The likes of Airbus, JLR, Renishaw, Rotork and BAE Systems are predictable choices, but must-haves.
– Manufacturing is on the cusp of a major revolution thanks to highly automated micro-factories that are less reliant on a low-cost or high-skill local workforce. This model can support the reshoring of production and the rapid global scaling of UK businesses. Electric vehicle maker, Arrival, is the poster child for this approach and has chalked up global orders of $1.2bn before a single vehicle has hit the roads. Let’s hear what they have to say.
– Building back better requires us to build greener, so we need to draw on the expertise of infrastructure providers like National Grid and SSE (client), as well as cleantech investors like Britishvolt.
– Growth is not just a matter of producing more stuff and generating more energy, but improving productivity in every area, so we also need to be tapping the expertise of companies that are automating vast swathes of the economy, like Ocado, Laing O’Rourke (client), CMR Surgical, Blueprism, Octopus Energy, The Hut Group, Deliveroo and JustEat Takeaway (client).
– The future belongs to the nations that lead in the design and application of Artificial Intelligence. The UK is currently in a strong position, thanks to leading players like DeepMind and emerging champions like semiconductor designer Graphcore and drug development platform BenevolentAI. They need to be on the team.
– And speaking of the life sciences, the last year has underlined their economic and strategic value. AstraZeneca (client) is our biggest pharma company by market cap, but we have a range of companies that deserve at a seat at the table too, from major players like GSK to innovators like Oxford Nanopore.
– Britain’s other traditional strengths include financial and professional services, the creative industries and consumer goods. Established leaders like Barclays (client), DLA Piper, WPP, Unilever and Diageo need to be heard, but so too the younger disrupters that have created huge value in a few short years, including the likes of Markit, LocalGlobe, Revolut, Checkout.com, Cazoo (client), Improbable Worlds, BrewDog, Farfetch, Fever-Tree, GymShark and Hopin, a company founded in 2019, which is now valued at more than $5bn. Britain needs to build more businesses like these, so let’s understand the conditions that helped them to flourish.
– Finally, the UK has committed to take more commercial risks. So we need to hear from companies working at the edge of technological possibility, such as hypersonic flight company Reaction Engines, fusion power company Tokamak Energy and Cambridge Quantum Computing.
There is much to do and there are many brilliant companies to draw upon for advice. But there was a more fundamental problem with the Industrial Strategy Council than just its makeup.
There are two sets of conditions for industrial success: The macro and the micro. Macro conditions include factors like the rule of law, flexible labour markets, low taxes and global connectivity. Business leaders from different fields will share similar concerns and be able to help the government frame a coherent set of priorities. But that’s not industrial strategy.
Industrial strategy relates to the micro conditions that benefit specific industries, from regulation and skills to local infrastructure and access to finance. What Hull needs to build an offshore wind industry is very different to what Cambridge needs in order to attract more tech investment. The City of London’s Big Bang was achieved through a series of specific, tailored interventions, such as the abolition of fixed commission charges, that had huge ripple effects. The devil is in the detail.
Theodore Roosevelt once said:
“It tires me to talk to rich men. You expect a man of millions, the head of a great industry, to be a man worth hearing; but as a rule they don’t know anything outside their own businesses.”
Roosevelt was wrong. It’s precisely because of their specific expertise in a narrow domain that governments should consider them worth hearing.
Consulting business leaders on the industries they know best through sector-specific reviews like Ron Kalifa’s widely-praised work with the fintech sector is more effective than a talking shop for the great and the good of British business, which will inevitably have to concern itself with generalities, however impressive the individuals.
The dissolution of a cross-sector working group is not, therefore, the end of industrial strategy, it’s a sign that Britain is about to get serious.