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What should a modern industrial strategy look like?

Does the modern industrial strategy published this week offer the radical departure our economy requires?

While the Centre for Local Economic Strategies (Cles) welcomes the first industrial strategy to be published in more than a generation, we are concerned it will do little to fundamentally alter the fortunes of the people and places that have been ravaged by each wave of industrial restructuring since the late 1970s.

It talks about ‘driving growth across the country’ and ‘developing skills’ and technical education but we need to place this in the context of local economic development strategy which, for years, has either been too cautious, too laissez-faire or spatially blind.

Furthermore, under fiscal conservatism, deep austerity has dangerously affected the ability of the public sector to act.

A modern industrial strategy requires the state and the public economy to act and play an entrepreneurial role – stimulating, encouraging and supporting wealth creation.

Without recognition of how austerity damages this capability, it’s hard to see how this strategy represents a genuine step change.

We need a modern industrial strategy that has a nuanced understanding of the challenges faced by the real economy, that understands how economic development can bridge people and place-based policy approaches, and where productivity gains can develop an inclusive 21st century economy that works for everyone.

Here’s our thoughts on key aspects of the policy:

Devolved industrial strategy?

Theresa May’s rhetoric around a more interventionist role for government is a positive development. However, the message needs to be backed up by a greater spatial and redistributive drive, to direct policy toward areas of the country left behind by the recent focus on ‘winners’. While additional funding to drive the Northern Powerhouse agenda is welcome, there will be many local enterprise partnerships around the country scrabbling for resources.

The strategy dedicates a chapter to ‘creating the right institutions to bring together sectors and places’. A strategic industrial strategy needs to be co-ordinated and aligned with local policy priorities and reflect local plans for infrastructure. Devolution should allow more locally appropriate approaches to innovation, approaches that may not be focused around elite science, or promoting tech start-ups. Handing responsibility to sectors is not going to steward investment geographically.

Fostering innovation:

The UK has long lagged behind our European competitors in technical education, and while serious post-16 reforms will be essential, we need to do far more to stimulate interest and passion in technical subjects. Children exposed to technology and innovation at a young age are more likely to pursue these career paths, but are schools working with private business to promote the opportunity? The Studio School concept addresses the growing gap between the skills and knowledge that young people need to succeed, through a bold approach which includes teaching through enterprise projects and real work. Investment in further education colleges and developing technical institutes will only help drive productivity if they can attract school leavers in the first place.

Opportunity for those in work:

The industrial strategy highlights the problem of adults with low basic skills, but fails to address how such adults may gain from investment in technical education. Community learning centres and better information for adults does not appear to match the seriousness of the challenge. With 49% of adults with numeracy levels below those of an 11 year old and 15% of adults below this level for literacy, accessible technical education for all will require a flexible delivery system that allows those in low paid work to upskill. We need to find ways to move people up within the zero-hours flexibility of the current labour market.

A foundational economy:

The strategy is largely silent about less glamorous sectors of the economy that need support. Retail and distribution, healthcare and education may not be shiny, but are equally, if not more, important because they are used by everyone regardless of income or social status. Where’s the equivalent of an aerospace growth partnership for British retail? Investing in the foundational economy would produce more inclusive growth, employing as it does around 35% of the working population compared to 8% in manufacturing. Raising productivity levels among low wage firms could close the productivity gap with Belgium, France, Germany and the Netherlands.

A collaborative economy:

We need an industrial strategy that reflects how digital and smart technologies are shaping an open source and collaborative economy, in which peer-to-peer models could flatten the economy and distribute wealth more widely, and which creates deep relationships between producers and consumers. From the maker movement to app development, digital infrastructure investment offers the potential to grow a collaborative economy which could be more sensitive to local social concerns and unmet social needs. However, we need to widen access to opportunities for innovation with for example, makerspaces in every public library as the Behavioural Insights Team has suggested.

The fourth industrial revolution:

Research and development funding for smart energy technologies; robotics and artificial intelligence and 5G mobile network technology are welcome, but we also need to embed these sectors’ requirements into skills and education systems. We also need to invest in those skill sets that robots are less likely to possess, such as complex problem solving, critical thinking and creativity.

Our modern industrial strategy needs to allow our key growth sectors to thrive while also enabling and nurturing new emerging local economic models. It must harness emerging trends and look to the future, while breaking through the floor of our two-tiered economy. We need to rethink our skills provision for a radically different future, forgetting about the skills escalator and heading straight to the elevator.

  • Stuart MacDonald is associate director at CLES

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