Comment

Industrial Strategy – building a Britain fit for the future

In the wake of the budget last week, Greg Clarke has today launched the Government’s Industrial Strategy.

The Strategy sets the scene for the UK’s key economic drivers with the ambition to narrow the productivity gap and boost earning power across the country. It demonstrates the Government’s proactive approach to new technologies and in responding to a changing economic context. In doing so it looks to build on the country’s strengths and address its weaknesses.

It is formed around five ‘foundations’ of productivity:

1. Ideas – the world’s most innovative economy
2. People – good jobs and greater earning power for all
3. Infrastructure – a major upgrade to the UK’s infrastructure
4. Business environment – the best places to start and grow a business
5. Places – prosperous communities across the UK

The Government also sets four ‘Grand Challenges’ to put the UK at the forefront of the industries of the future:

1. Artificial Intelligence (AI) and Data Economy – put the UK at the forefront of the AI and data revolution
2. Future of Mobility – become a world leader in the way people, goods and services mode
3. Clean Growth – maximise the advantages for UK industry from the global shift to clean growth
4. Ageing Society – harness the power of innovation to help meet the needs of an ageing society

Key policies include the following funding initiatives centred around the five foundations:

• £725 million Industrial Strategy Challenge Fund  will support programmes to capture the value of innovation and support R&D initiatives. This will include £170 million to transform construction
• £406 million for STEM subjects
• £64 million as part of the National Retraining Scheme for digital and construction re-skilling
• £31 billion increase to the National Productivity Investment Fund, supporting investments in transport (£4.9 billion), housing (£11.5 billion), digital infrastructure (£0.7 billion) and R&D (£7.1 billion)
• £400 million for electric vehicle charging infrastructure and a further £100 million to extend the plug-in car grant
• Over £1 billion digital infrastructure investment including full-fibre network roll out
• £2.5 billion Investment Fund as part of a drive for over £20 billion investment in innovative and high potential businesses
• £1.7 billion Transforming Cities fund for intra-city transport in the combined authorities
• £42 million to pilot a Teacher Development Premium.

There are strong links to elements Philip Hammond spoke of in the budget such as housing and transport investment, particularly with reference to the combined authorities and the Transforming Cities Fund. For example, the National Infrastructure Commission will launch a new innovation prize to determine how future roadbuilding should adapt to supporting self-drive vehicles. The West Midlands will be a key testing location given its expertise in autonomous vehicles. There are also acknowledged links with existing projects such as HS2 which is seen as an example of how an infrastructure project can deliver the wider ambitions of the Strategy.

Housing is recognised as a key part of the ‘infrastructure’ required to deliver the Strategy. Importantly in the context of the recently closed consultation on the proposed standard method for calculating local housing need. The Strategy reconfirms the stated need to deliver 300,000 homes a year outlined through the recent Budget.  The important link between economic growth and housing provision is articulated through the Strategy which confirms that the Government will ‘deliver bespoke housing deals with places where housing demand is high [and] wants to support places with ambitious and innovative plans to build additional homes where they are needed, and which will support wider economic growth'. It is of note that housing makes up the largest allocation to date of the National Productivity Investment Fund (£11.5bn already allocated).

Though a national strategy, the localism agenda is still evident, with areas required to develop Local Industrial Strategies, led by the Local Enterprise Partnership (LEP) and to be agreed with central Government. Mayoral Combined Authorities will have a single strategy led by the mayor and supported by the LEP. Shared geographies, such as across the Northern Powerhouse, Midlands Engine, Cambridge-Milton Keynes-Oxford corridor and Thames Estuary, will be supported in working together. The initial focus will be on areas with the potential to drive wider regional growth, focusing on clusters of expertise and centres of economic activity, with the first to be agreed by March 2019. They will identify local priorities to improve skills, increase innovation and enhance infrastructure and business growth. The role of these strategies in ‘setting’ the wider planning agendas for the major conurbations will form an important consideration, as will the pace at which they are progressed. How such strategies will dovetail with Local Plans and the Strategic Economic Plans of LEPs and the degree to which developers and businesses will be able to influence and respond to the strategies in delivery are all important questions for the LEPs / Mayors and the Government to consider as they are progressed. In bringing the national agenda to the local level there is a danger that the proactive approach taken centrally may lose some of its focus.

A number of Sector Deals have been progressed since the Green Paper. These are in life sciences; construction; AI; automotive (electric and autonomous vehicles); and creative industries (digitalisation). The deals are focused on responding to specific issues to create opportunities to boost productivity, employment, innovation and skills. Specifically for the Construction Sector Deal there is a focus on skills and recruitment. Labour force volume in the sector has been raised as an issue over a number of years and so this is welcomed in light of potential further impacts from leaving the EU.

Converse to the Green Paper earlier in the year, there are a number of aspects which subtly indicate the crucial role of the logistics sector in enabling economic activity, such as the ‘Future of Mobility’ challenge, and ways in which it can be a part of technology innovation, such as AI and clean growth. The links to the logistics sector could be made clearer here.

Overall, while the Strategy focuses on some big ticket items, and big funding to match, it is non-prescriptive on a number of fronts. Understanding how the ambitions will be delivered will be particularly important. More detail is required to ensure the Government is fully evidencing how business, civil society and academia can each play a part. Importantly for the development industry, the role of the planning system in bringing forward the industrial agenda is yet to be set out by the Government.

If you have any queries relating to the Government's Industrial Strategy, please contact Amy Gilham or Antony Pollard.

27 November 2017