UK launches Industrial Strategy as challenges of Brexit loom

Derek du Preez Profile picture for user ddpreez November 26, 2017
The UK Government’s Industrial Strategy focuses on sector deals, including building the UK’s AI credentials, as well as investing in people and infrastructure.


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The UK Government has finally launched its Industrial Strategy white paper, which aims to boost the UK’s productivity ahead of a challenging economic period - amplified by the difficulties posed by exiting the European Union.

Prime Minister Theresa May and Business Secretary Greg Clark said that the strategy, which has a strong technology focus, is even more important to the country’s future prosperity, given the potential impact of Brexit.

Last week the Office for Budget Responsibility halved its forecast of the UK’s long-term productivity trend to 1%.

Industry and stakeholders have been providing feedback on the strategy for months, and has  been criticised by MPs for a lack of focus on cross-government execution and a lack of targets to measure success against.

The Strategy aims to make the UK the “most innovative nation by 2030” and has set up an Industrial Strategy Challenge Fund, which will see the government invest £725 million over the next three years in areas such as robotics, AI, clean and flexible energy, driverless vehicles and space technology.

The government has previously committed £1 billion to the first wave of Industrial Strategy Challenge Fund projects, including investing £246 million in next generation battery technology and £86 million in robotics hubs across the UK.

Last week the Prime Minister announced an ambition to increase the level of investment in research and development (R&D), rising from 1.7% to 2.4% of GDP by 2027. This could mean around £80 billion of additional investment in advanced technology in the next decade, which the government hopes will help to transform whole sectors, create new industries, and support innovation across the country. Prime Minister Theresa May said:

Our modern Industrial Strategy will shape a stronger and fairer economy for decades to come. It will help create the conditions where successful businesses can emerge and grow, and support these businesses in seizing the big opportunities of our time, such as Artificial Intelligence and Big Data, whilst also making sure our young people have the skills to take on the high-paid, high-skilled jobs this creates.

As we leave the European Union and forge a new path for ourselves, we need to focus on building a better future for our country and all the people who live in it. With the Budget last week, and our Industrial Strategy in the years ahead, we will build a Britain fit for the future.

The details

Central to the Industrial Strategy is what the government is calling ‘sector deals’ - with industries that include life sciences, construction, Artificial Intelligence and automotive. However, the policy page currently gives little away, beyond stating that they are “partnerships between the government and industry on sector-specific issues [that] can create significant opportunities to boost productivity, employment, innovation and skills”.

However, ahead of signing the Life Sciences Deal, which is due in the next few weeks, the government has confirmed today that life sciences company MSD is set to make a major investment into the UK economy with the opening of a new state-of-the-art UK hub. The investment will support a new world-leading life sciences discovery research facility in the UK, creating 950 jobs.

Business Secretary Greg Clark said:

We are at one of the most important, exciting and challenging times there has ever been in the history of the world’s commerce and industry. Powered by new technology, new industries are being created, existing ones changing and the way we live our lives – as workers, citizens and consumers – transformed.

We are an open, flexible economy, built on trade and engagement with the world. We have a competitive business environment with a deserved reputation for being a dependable and confident place to do business, thanks to our high standards, respected institutions and a reliable rule of law.

We are renowned for innovation and discovery, with some of the best universities and research institutions in the world producing some of the most inventive people on earth. We have commercial and industrial sectors – from advanced manufacturing to financial services; from life sciences to the creative industries – which are competitive with the best in the world.

In this Industrial Strategy we set out how we will maintain and enhance these and other strengths and deploy them to our advantage.

The Strategy has also identified four ‘Grand Challenges’, which it says are global trends that will shape the country’s rapidly changing future and which the UK “must embrace”. These include artificial intelligence, clean growth, an ageing society and the future of mobility.

It hopes that by outlining each challenge, business, academia and civil society will work with government to innovate and develop new technologies to ensure that the UK “seizes these global opportunities”.

Five foundations

Finally, the Strategy identifies five foundations of productivity that it hopes to invest in to help shape the future of the UK’s economy. These include:

• Ideas
• People
• Infrastructure
• Business environment
• Places

A number of policy announcements and investments were revealed in the Chancellor’s budget last week relating to these five foundations.

For example, the government said that it will be raising total research and development (R&D) investment to 2.4 per cent of GDP by 2027.

It will also Invest an additional £406 million in maths, digital and technical education, helping to address the shortage of science, technology, engineering and maths (STEM) skills.

Plans to boost the UK’s digital infrastructure include over £1 billion of public investment, with £176 million for 5G and £200 million for local areas to encourage roll out of full-fibre networks.

The government has said that it will also create a new Transforming Cities fund that will provide £1.7 billion for intra-city transport. This will fund projects that drive productivity by improving connections within city regions.

For a full list of the policy and investment announcements, you can view the policy page here.

My take

Nothing too unsurprising here, the government appears to be collating much of its budget and recent thinking into the Industrial Strategy - which seems to be at the centre of all its thinking for building the future economy. However, some of the details are still thin. We don’t really have much insight into what these key sector deals actually look like and there still isn’t a great deal to measure the country’s success against.

And then, of course, there’s Brexit. It’s undeniable that in spite of a solid Industrial Strategy, its success could well be overshadowed by the costs associated with exiting the European Union. Will it be enough? There are plenty of people that think that any benefits will be outweighed by the impact of leaving the single market and customs union.

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