Britain's post-Brexit Industrial Strategy needs more realism, less rhetoric

Profile picture for user slauchlan By Stuart Lauchlan November 20, 2016
Summary:
Prime Minister Theresa May wants to avoid the mistakes of the past and enable British digital age start-ups to scale up to succeed. But what's the reality behind the rhetoric?
may2
Prime Minister May

Our modern Industrial Strategy will be ambitious for business and ambitious for Britain.

The post-Brexit challenges for the UK with respect to the technology sector and the wider digital economy have been well-documented over the past few months and it’s fair to say that there are still many more questions than answers to date.

One thing that has emerged however is the ongoing promise of a formal Industrial Strategy for the UK, one that will foster and encourage both the development and growth of digital businesses, but which play a part in attracting inward investment. Last week saw Google confirm its plans for expansion in a post-Brexit Britain, while today Facebook has made a commitment to grow its UK workforce by 500, mostly in skilled engineering jobs.

Those are the kind of announcements that Prime Minster Theresa May and her government inevitably want to focus on. But what about the finer detail of the Industrial Strategy? Today, the Prime Minister addressed the Confederation of British Industry (CBI) Annual Conference, at which she pledged:

  • substantial real terms increases in government investment worth £2billion per year by 2020 for research and development, to “ensure British business remains at the cutting edge of scientific and technological discovery”.
  • a new Industrial Strategy Challenge Fund to back priority technologies - such as robotics and biotechnology - where there is potential to turn strengths in research into a global industrial and commercial lead.
  • a review of current R&D tax incentives to ensure the global competitiveness of the UK as a home for scientists, innovators and tech investors.

These will be formally announced in the Autumn Statement from the Chancellor of the Exchequer on Wednesday this week, but today May told the CBI that the mission statement is simple:

We are backing the innovators and backing the long-term investors.

Plans

The intention, she added, is to avoid the errors of the past and not see British innovation slip through the national fingers:

Today, Britain has firms and researchers leading in some of the most exciting fields of human discovery. We need to back them and turn research strengths into commercial success.

That means not only investing more in research and development, but ensuring we invest that money wisely, supporting technologies and sectors that have the potential to deliver long-term benefits for Britain.

She noted that the UK currently ranks as third in the OECD for the number of start-ups it creates, but only 13th for the number of those that go on to become scaled-up businesses. It’s time for government itself to scale up its assistance, she declared, just as occurs in the US:

There, strategic use of government procurement not only spurs innovation in the public sector, it gives new firms a foot in the door. In fact, many of the technologies in your smartphone, from touch-screens to voice recognition, were originally commissioned, not by Apple or Microsoft, but by the US government.

To assist businesses, the UK government will launch a new Patient Capital Review that will look into how to remove barriers to long-term investment in innovative start-ups, as well as reviewing the existing Small Business Research Initiative to see how its impact and influence can be enhanced.

But behind all this is the Brexit elephant-in-the-room - immigration. May stated:

We are ambitious for Britain to become the global go-to place for scientists, innovators and tech investors. We will continue to welcome the brightest and the best – but can only do so by bringing immigration down to sustainable levels overall so we maintain public faith in the system.

That, of course, raises the question of skilled immigration to power the government’s post-Brexit vision of a new Industrial age. Nicola Mendelsohn, Facebook’s vice president of EMEA, had a clear message for the UK’s digerati:

If you’re looking for a job - we’re hiring.

She stated:

We came to London in 2007 with just a handful of people, by the end of next year we will have opened a new HQ and plan to employ 1,500 people. Many of those new roles will be high-skilled engineering jobs, as the UK is home to our largest engineering base outside of the US and is where we have developed new products like Workplace.

But is the skills base in the UK sufficient to meet the government’s stated ambitions without some degree of immigration of qualified professionals? Julian David, CEO of UK technology industry lobbyists techUK, commented:

Access to talent at every level is vital for the tech sector. We have to invest in our own talent pipeline and attract the brightest and the best from around the world. The Prime Minister is right that more must be done to boost STEM skills and technical education. But we also prize creativity so it would be good to hear the PM talking about a more rounded STEAM that recognises the importance of the arts. From making the apprenticeship levy work for tech scale-ups to supporting teaching in schools, including on delivering of the new computing curriculum, the Government must make the UK’s future skills pipeline a central pillar of its forthcoming Industrial Strategy.

It is encouraging to hear that UK tech businesses and our world-leading universities will continue to be able to access to world-leading talent – this is vital for growth. techUK will work closely with the Government on both driving a revolution in our domestic skills talent pipeline and creating a world class low friction immigration system that ensures the UK economy remains open and flexible to the needs of fast growing businesses.

For its part, techUK has called for the Chancellor to address the skills question in his Autumn Statement on Wednesday, calling on him to:

  • Scrap plans to introduce the immigration skills charge and postpone planned increases to Tier 2 minimum salary thresholds until a new smart immigration strategy has been developed that takes full account of the UK’s changing relationship with the European Union.
  • Explore potential tax credits for investing in domestic digital skills initiatives and returner schemes to encourage people to return to the sector after a career break.
  • Provide an additional £50 million to support continual professional development for teachers in the delivery of the computing curriculum. This will be key for ensuring the next generation of young people have a positive experience which equips them for new roles.
  • Support the scaling of local digital inclusion initiatives to ensure that all citizens across the UK are able to reap the benefits of digital. This will be key to ensuring that the new right to digital skills in the Digital Economy Bill is implemented.

My take

As with the Google investment from last week, it would be churlish not to raise a cheer for Facebook’s announcement today as a gesture of faith in the UK as a tech hub. Equally it would be irresponsible not to note that both the Google and Facebook plans could yet be subject to alteration, depending on how the Brexit negotiations go over the next two years or so.

Meanwhile the new Industrial Strategy commitments are themselves encouraging, if not fully-formed or far-reaching enough as yet. Talking up and supporting R&D in emerging tech areas such as robotics and AI is entirely a step in the right direction. But, as May noted, all too often in the past UK innovators have produced the start-ups and the pioneering technologies, then been let down by investors and governments, leaving other countries to benefit economically.

In a post-Brexit Britain, long-term productivity growth will be critical. The country cannot afford to stage a digital revolution on behalf of other economies. For her Industrial Strategy to succeed, May must ensure that the conditions are right for Britain to create its own Facebook, not just to encourage the US version to top up its local workforce. That’s an enormous challenge. May calls it:

 

A once in a generation chance to shape a new future.

Good rhetoric; now the reality needs to be better.