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Rebecca Riley

Business development director, City-REDI

Is the government’s new industrial strategy really a game changer?

The reality is when dealing with productivity there are fundamental drivers academia and policy have recognised for a long time, so making the next iteration of policy different and new is incredibly hard. The government’s industrial strategy white paper is no different; there is no major change in strategy from previous eras, but it attempts to bring sector specific and technology specific approaches together in a matrix approach.

The five foundations of People, Infrastructure, Business, Environment, and Places are the mainstays of economic policy, but maybe the concept of ‘ideas’ has the seeds of game change. If we accept the economy is just as much driven by perceptions, then a focus on moving forward, developing new ideas and deploying them is key to Britain remaining a global leader. The focus on ‘grand challenges’ is arguably the biggest departure in policy terms, and the shift in language to a more mission focussed drive possibly sets us on a path to coping with the uncertainty of the future.

The elephant in the room however is that ‘productivity gains’ translates to businesses getting more out of the resources they have, and technological improvements often lead to less need for people. In policy terms this is the major challenge facing us: how do we ensure the workforce is adaptive, and what lessons have we learnt from the past? What we have seen since the crash is businesses trying to keep the same employment levels in the face of recession, and this has been managed through wage depreciation and stagnation. Meanwhile, demand for technical skills and craft based knowledge and customer relationship skills is rising; and as the service industry is now seeing, technology is changing the fundamentals of how we deliver services.

Many commentators say we are on the verge of another industrial revolution, based on artificial intelligence, data and new technology. History tells us we do not recognise change until after the change has already happened, and the reality is our economy is already shifting. The industrial strategy is seeing this change as positive and is investing heavily in capturing the gains, and indeed the strategy quite rightly points out that it’s “not enough to look at the economy we have. We must make preparations for the economy we need to become”. I tend to think of the change as inevitable and that the investment is necessary to simply keep pace with the world as it changes. The game changer will be enabling as many people as possible to be part of this revolution. The lack of engagement and policy responsibility from the Department for Education therefore is a worrying omission; our future ability to access technology is reliant on a highly skilled workforce and those skills start early in life.

The ‘ideas’ foundation is driven by raising total research and development to 2.4% of GDP by 2027; increasing R&D tax credit to 12%; and investing £725m in new industrial strategy challenge fund programmes to capture the value of innovation. The challenge will be seeing these filter through to productivity gains, which will rely on the R&D remaining in the UK and UK businesses benefitting from the innovation in terms of employment and performance. This requires government to have successful delivery vehicles and for universities to have a key role in this. Here at City-REDI (City Regional Economic Development Institute) we are researching the role and impact of social sciences on commercialisation of technology and research developed in universities, and how vital it is to ensure public money invested in university R&D is embedded in local industrial strategies.

The delivery challenge is still to be resolved, with a review of Local Enterprise Partnerships also in the strategy and a patchwork of local delivery structures and mayoral systems. If, as the strategy states “investment decisions need to be more geographically balanced and include more local voices”, lessons need to be learnt. On the digital and tech agenda, according to the Ernst and Young review Catapults have not been successful, and the implementation concept has been inconsistent and could have had a significantly greater impact. According to the review, they lack a ‘single, commonly agreed and consistently communicated purpose statement’ and this has implications for how they are performance monitored and whether they deliver. The review is pretty damning overall, and says they have failed to achieve their funding model expectations, and they remain overwhelmingly reliant on public funding. So government may need to think hard about what mechanisms they use to deliver the ‘ideas’ foundation and wider industrial strategy.

If government is serious about tackling productivity, balancing investment, driving technology advances and addressing the fact that large parts of the population may be left behind by the ideas revolution; they need to think seriously about how they will ensure consistent and stable delivery of the strategy. The importance of the effective devolution to places and organisations who are close to the ideas and people, comes to the fore, otherwise this just becomes another iteration of a strategy consigned to the political wayside.

Rebecca Riley is business development director at City-REDI.