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Coalition’s industrial strategy is no more than economic tinkering

  • Structural weaknesses in the UK economy will not be tackled by Vince Cable’s plan
  • Industrial strategy goals are unambitious and will not solve business under-investment or reverse the trade deficit
  • Programme fails to consider the cost of labour, total employment or the exchange rate

The coalition’s industrial strategy amounts to “little more than economic tinkering” and cannot possibly tackle the structural problems facing the UK economy, a Civitas report warns today.

The objectives set out by Business Secretary Vince Cable are too easy to achieve and fail to address important issues that must be overcome if Britain is to secure an export-led recovery. It lacks the ambition required to unite industry behind a national cause.

“The limited programmes contained in the strategy thus far cannot solve the structural problems in the UK economy in terms of business underinvestment, poor productivity, poor public education, a substantial trade deficit and a weakened manufacturing base,” the report’s author, Glyn Gaskarth, writes.

“This strategy is not an equivalent of the Manhattan project to develop a nuclear weapon or John F Kennedy’s pledge to send a man to the moon. It does not unite industry behind a cause of national importance.”

In a comprehensive study of the 11 key sectors that are the focus of the coalition’s industrial strategy, Gaskarth details what measures are proposed and what is left unanswered.

Modest targets appear to have been “set to be easily achieved rather than to spur the sectors to succeed”, while funding is scarce and often repackaged.

Gaskarth points out that the strategy does not promise either a positive trade balance or to make UK workers the most productive in the world.

It barely considers UK labour costs, the value of sterling and its effect on exports, or the cost of energy and its impact on manufacturing.

“It is difficult to see how the industrial strategy designed by the government would result in their stated desire for an economic recovery based on business investment, exports and productivity growth,” Gaskarth writes.

“Instead we have a UK economic recovery based on cheap credit, increasing house prices and domestic consumption. The industrial strategy appears to be little more than economic tinkering.”

The government’s commitment to decarbonise the economy is the only ambitious part of the strategy, but its plan to do this is taking too long.

“To speed the progress towards UK decarbonisation, the energy market has been redesigned to provide a significant subsidy to allow low carbon energy generation,” Gaskarth writes.

“The cheapest and most efficient low carbon form of power generation – nuclear – will receive no direct public subsidy due to the coalition government’s political preferences.

“For each green technology sponsored, the flaws remain the same: demand for the products remains low, the technologies are predicted to require significant public subsidy for a sustained period and, in many cases, a significant proportion of the manufacturing process is likely to occur abroad.”

Gaskarth recommends that the government should cancel its £1 billion of investment in offshore wind farms and put the money towards more reliable energy sources.

The UK government agreed on the need for a UK industrial strategy in September 2012. In the intervening two years they have identified eleven sectors that require more Government support and eight great technologies in which the UK should seek to be a world leader.

Sectors were identified based on an analysis of the sectors in which the UK has, or could have, a competitive advantage by the Department for Business, Innovation and Skills (BIS): aerospace, agricultural technology, automotive, construction, information economy, international education, life sciences, nuclear, offshore wind, oil and gas, and professional and business services. Plans for additional industrial sectors such as retail and chemicals have also now been developed.

For each sector, the government considered how to increase the UK’s global competitiveness, strengthen the manufacturing supply chain, support innovation and maximise export potential.

Challenges in the following areas were identified: skills, access to finance, government procurement, technologies and sector partnerships. Between 2012 and 2014 the Government developed strategies for each of the sectors identified and established joint government/industry councils in each sector to oversee their implementation.

Gaskarth says it is too early to judge the success of the programmes against their stated goals but argues that the goals themselves are wanting.

“The industrial strategy as currently constituted will achieve the Governments’ objectives because the objectives identified are not sufficiently ambitious. It is easy to meet them,” he writes.

“Almost absent from the strategy are considerations of the cost of labour, the total level of employment and the exchange rate.

“The strategy offers no comfort to the UK unemployed, whose skill levels do not match the high skills expected of those that will fill the few posts envisaged to be created by this strategy. It is guilty of a lack of ambition.”

Notes

The full report, ‘What Strategy? How the coalition’s industrial policy lacks coherence and ambition’, can be downloaded below.

Glyn Gaskarth has worked for the Local Government Information Unit and the TaxPayers’ Alliance. Prior to this he worked for Accenture. He also served as a Special Advisor to then Shadow Home Secretary David Davis MP and as a parliamentary researcher for Oliver Letwin MP.

For further information contact:

Daniel Bentley
T: 020 7799 6677
E: daniel.bentley@civitas.org.uk

Civitas: Institute for the Study of Civil Society is an independent, cross-party think tank that facilitates informed public debate on important issues of the day. It is not affiliated to any political party and receives no state funding


What Strategy? How the coalition's industrial policy lacks coherence and ambition

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