69.Sector deals alone will not tackle the UK’s productivity puzzle. The Automotive Sector Deal has not prevented Honda, Nissan and Dyson cancelling projects or taking jobs elsewhere. The Nuclear Sector Deal has not prevented investors withdrawing from the Wylfa and Moorside projects. While the Government has made clear it intends to continue with sector deals as a means of supporting and collaborating with business, we welcome the Government’s concurrent pursuit of cross-cutting policies that should support businesses working on and investing in the long-term issues facing the UK. Many sectors seeking a deal have also been looking for wholesale changes to policies in the UK, such as energy prices, the apprenticeship levy and business rates. Sector deals alone will not solve these challenges and the Government should be taking action on them as well as on sector-specific issues.
70.Sectors that have received a deal or sought one have highlighted the ability they can have to bring their industry together, even in self-declared disparate and dysfunctional sectors such as construction. The Government has been overly prescriptive on how sectors should organise and present a deal. A focus on figureheads and new bodies risks shutting out sectors or breaking up successful relationships for the sake of vague Government criteria. For sector deals to succeed, the Government should keep its ‘open door’ promise to sectors seeking a deal, trusting them to determine the most effective leadership and not discriminate against any sector that can meet its criteria for a deal.
71.The process of negotiating a sector deal appears to be lengthy and confusing, other than for the handpicked sectors that featured in the Industrial Strategy as pioneers. Sectors have found themselves waiting in vain for clarity or investing time and resources in proposals for a deal only to find Government, or parts of it, to be unengaged. Even sectors that have secured a deal, such as offshore wind, compared the process of securing a deal to playing darts blindfolded. The criteria for securing a deal, announced after some deals has already been agreed, are broad enough that sectors are confident they can meet them, but vague enough that the Government can deny them. In the interests of transparency and fairness, this needs to change.
72.The newly-established Industrial Strategy Council has a crucial role in measuring and reporting on the potential success of the Industrial Strategy and its sector deals. The Government will need to work with the Council to ensure that the process and outcomes of sector deals can be fairly and independently measured, offering clarity on the potential for agreements to be made and the outcomes of deals to date. The Industrial Strategy was reluctant to offer new money to sectors seeking a deal, but those sectors engaged on the Government’s current priority areas have seemingly been able to access significant funding for research and reform. Successive Governments have failed to resist the temptation to rebadge or re-announce funding streams as if it represented new money. This Government must be clearer to business, Parliament and the public on what funding is available to business and whether sectors not engaged in the narrow projects supported by the Industrial Strategy Challenge Fund can still seek and find financial support for their potential deals.
73.The Government’s focus to date has been on the most innovative industries. It should not allow its pursuit of these sectors to dilute the work needed to improve our least productive sectors and to reduce the long tail of unproductive businesses. Nor can it afford to ignore regional disparities, which could prevent sector deals and the entire Industrial Strategy from having an impact across the length of the UK and breadth of our economy, if it really wants to boost productivity and ultimately improve living standards.
Published: 19 March 2019