Will the government's new 'industrial strategy' offset the worst of Brexit?

Theresa May says the state will 'step up to a new, active role' in the economy. But will Whitehall meddling be a boon for business?

by Jack Torrance
Last Updated: 23 Jan 2017

Whatever you think of how Theresa May has behaved since entering Number 10 last year, it’s fair to say she has inherited a poisoned chalice. While she might be riding high in the polls, May has to make a success of Brexit or else be remembered as the prime minister that screwed it all up.

It must be tempting to focus all of her attention on the grinding trade negotiations that are set to drag on for the years to come. But as well as getting a good deal from the EU and climbing into bed with new trade partners around the world, May says she wants to change the shape of the domestic economy.

Today she will set out the early plans for her much-vaunted ‘industrial strategy’, which focuses on improving skills and infrastructure for the long term. May says the strategy ‘will be underpinned by a new approach to government, not just stepping back but stepping up to a new, active role’ to support businesses and make sure the whole country benefits from economic growth.

The government will work with business leaders in specific industries, striking ‘sector deals’ to address their needs on skills, regulation, trade and innovation. It has already tapped ITV chairman Peter Bazalgette to work on a deal for the creative industries, top medic John Bell for life sciences, former Ford exec Richard Parry-Jones for low-emission vehicles, Siemens UK boss Juergen Maier for ‘industrial digitalisation’ and Lord Hutton for improving the nuclear industry (or at least the nuclear facilities that remain here, now outsourced to the French and the Chinese).

Since talk of a new industrial strategy began, some have rightly raised concerns about the government ‘picking winners’, a tactic that has gone badly awry in the past. But getting extensive input from business leaders like these will hopefully keep things on a sensible path. It remains to be seen just how involved with the schemes the private sector will be - presumably Mandarins will still be in the driving seat.

Read more: How much should the government meddle in business?

One might argue that a focus on areas at which Britain already excels, like the arts, cars and pharmaceuticals, is playing it safe. But maybe we’ll see some bolder choices in the future – the government says it ‘is prepared to work with any sector which can organise behind strong leadership to address shared challenges and opportunities.’ So in other words those industries with the deepest pockets and the most effective lobbyists will win out, rather as they do in the US already.

The strategy itself consists of 10 inoffensive ‘strategic pillars’ of the kind you might expect:

1. Investing in science, research and innovation
2. Developing skills
3. Upgrading infrastructure
4. Supporting businesses to start and grow
5. Improving procurement
6. Encouraging trade and inward investment policy
7. Delivering affordable energy and clean growth
8. Cultivating world-leading sectors
9. Driving growth across the whole country
10. Creating the right institutions to bring together sectors and places

(You can read the full 132-page consultation document here) 

Most of this isn’t new. May’s isn’t the first government to talk up the importance of STEM (science technology, engineering, maths) skills, making it easier to start and grow a business (a manifesto pledge of David Cameron’s) or encouraging more development in the regions. But it’s the first in a long time to wrap them all up into a defined ‘strategy’ – a flag in the ground designed to show that May will not be shy about intervening in markets when she deems it necessary. The government remains quiet on the topic of agriculture, the one tonne EU-subsided elephant in the room, whose future remains uncertain.

For now the warms words are not backed up by heaps of cash. The University and College Union decried the £170m set aside for new ‘institutes of technology’ as a ‘drop in the ocean’ and the new ‘Industrial Strategy Challenge Fund’ is part of £4.7bn of investment already announced in November.

The government’s stated intention to take a long-term approach to infrastructure and skills is no doubt welcome. But the real question is what happens when the industrial strategy conflicts with Number 10’s other political priorities - particularly on trade and immigration. Nonetheless UK Plc will be relieved to see the PM is not ignoring them altogether.


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