Britain launches interventionist drive for post-Brexit industrial revival

Prime Minister Theresa May held a regional Cabinet meeting at Sci-Tech, Daresbury, where she launched proposals for building a Modern Industrial Strategy. January 23, 2017. [Number 10 / Flickr]

The UK government yesterday (23 January) unveiled a new interventionist approach to rebalance its heavily services-based economy for the post-Brexit era, in a break with traditional Conservative laissez-faire economic policy.

Prime Minister Theresa May’s “Modern Industrial Strategy” demands closer collaboration in key industries in exchange for government support, aiming to increase productivity, reinvigorate industrial production and stimulate investment in technology and R&D.

The focus on industry and the shift to a governmental hands-on approach challenges the laissez-faire ideology championed by former Prime Minister Margaret Thatcher.

“Underpinning this strategy is a new approach to government, not just stepping back and leaving business to get on with the job, but stepping up to a new, active role that backs business,” May wrote in a consultation document on the policy.

May asked businesses to work together to tackle industry-specific challenges, citing examples of successful collaboration that have helped attract overseas investment from the likes of carmaker Nissan, and enabled aerospace firms such as BAE Systems to develop a competitive edge.

In return she pledged to reciprocate with “Sector Deals” that address regulatory barriers, look at how trade and investment deals can be used to increase exports, and support the creation of new institutions to provide leadership, drive innovation or boost skills.

The government said early work had been done on deals for a number of industries: life sciences, ultra-low emission vehicles, nuclear and creative industries. But it said it would work with any sector that could “organise behind strong leadership to address shared challenges and opportunities”.

Europe’s re-industrialisation agenda: A green policy U-turn?

European leaders are in broad agreement over the need to relaunch manufacturing industries. But walking the talk implies trade-offs and a possible u-turn – on climate, and energy policies, in particular – that some warn could put future growth at risk.

Productivity puzzle

The plan aspires to distribute wealth more evenly, following decades of industrial decay in parts of Britain. The economy’s narrow base has been blamed for a mood of disenfranchisement that drove many voters to back Brexit.

It aims to boost Britain’s productivity, which has long lagged European rivals Germany and France. It cited the success of targeted government intervention in countries including the United States and South Korea.

The outline of was set out in a “Green Paper” inviting views from industry on the government’s objectives.

The government listed 10 strategic pillars behind its strategy such as skills development and improved procurement.

The publication drew positive responses from businesses looking to push their industries to the top of the government’s agenda, ranging from waste management firms to builders of new nuclear plants.

But not all sectors felt they would benefit.

A consumer goods industry executive, who declined to be named, said consumer goods were very far down the priority list.

“The high-skilled and high-paid, that’s what drives economic spending and growth. Pharmaceuticals, heavy industry, IT – all those sectors are always going to be the ones that are more favoured,” the executive said.

An industrial policy for Europe ?

The Polish Commissioner responsible for industry is set to launch new proposals for an industrial strategy early next year. She tells EURACTIV that the new approach must be concrete and that the overriding aim must be to promote the competitiveness of European industry.

Back in fashion

Since coming to office weeks after Britain’s vote to leave the EU last year, May has pushed the once-unfashionable concept of industrial strategy to the top of her agenda, creating a new government department to lead the project, and chairing a top-level cabinet committee on the subject.

Britain’s impending exit from the EU threatens to undermine the financial services sector, with several banks planning to shift thousands of jobs abroad because they fear they will lose access to the EU market.

May said last week that Britain would be withdrawing from the single market, and seeking a free trade agreement with the EU instead – a path critics have described as a “Hard Brexit” that would undermine the industrial strategy.

“It’s like the manager tying their team’s bootlaces together while telling them they have a plan to win the match,” said Don Foster, business spokesman for the rival and pro-EU Liberal Democrat party.

May presented the full proposals, including plans to boost the teaching of technical skills and mathematics, and a 556-million pound boost for infrastructure projects, at a specially convened cabinet meeting in northwest England.

Innovation and entrepreneurship

The European Union wants to create an innovation-friendly environment by 2020 that makes it easier for great ideas to be turned into products and services, bringing the economy growth and jobs.

The European Commission sought to break with years of inaction on industrial policy when it unveiled a new strategy in 2012, promising a "new industrial revolution".

The strategy's headline goal is to raise industrial activity to 20% of EU gross domestic product by 2020, compared to just over 15% today, taking it back up to pre-crisis levels.

Europe is a world-leader in many strategic sectors such as engineering, automobiles, aeronautics, space, chemicals and pharmaceuticals, the Commission argues, saying it must build on those strengths to relaunch manufacturing.

Industry still accounts for both 80% of Europe's exports. 80% of private-sector R&D investment also comes from manufacturing, underlining the huge potential of relaunching the economy.

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