Industrial Strategy: Sector Deals Contents

Conclusions and recommendations

Introduction

1.We welcome that the Government has accepted the recommendation of our predecessor Committee and recognised the importance of cross-cutting strategies, their grand challenges, to go beyond a siloed, sectoral approach. (Paragraph 5)

Establishing Sector Deals

2.A widened scope for the Industrial Strategy Challenge Fund and Innovate UK could enable a move from supporting established and high-profile sectors, if the Fund or other streams of R&D investment are made available to industries not yet at the forefront of innovation. The Government should ensure that Innovate UK has sufficient funding and flexibility to support innovation and productivity growth in sectors beyond those receiving sector deals or those meeting current Ministerial-set grand challenges. (Paragraph 14)

Who Gets a Deal?

3.Honda’s decision to consolidate its operations in Japan as it focuses on electrification, and Dyson’s choice to locate itself and the construction of its electric vehicles in Singapore should cause the Government to question whether a sector deal or other Government interventions can solve the challenges faced due to Brexit and global changes to the automotive industry (Paragraph 17)

4.We welcome that the Government identified the importance of the construction sector to the UK economy and ensured it secured an early sector deal. The Government should now deliver on its promises to the industry and ensure its commitments in this and every sector deal are fully funded. In return, the construction sector must work together to deliver the changes needed to improve its workforce, business model and uptake of technology for it to be a sustainable part of the economy. (Paragraph 22)

5.The Government have not indicated whether the list of sectors seeking a deal is shrinking or growing, but the slow progress in achieving deals beyond the pioneer sectors, and the lack of clarity in what might be possible, is in the interests of neither business nor Government. The pioneer sectors had the benefit of early Government support and a close working relationship. While the Government has argued that there is no requirement for sectors to have a deal and no deadline for concluding one, many sectors have invested resources in their proposals sector deals, in already challenging business environments. The Government should confirm whether sector deals are still open to every sector of the economy, and be clear on the level of engagement a sector pursuing a deal can expect from Government. The Government should provide a roadmap for sectors seeking a deal, making clear the milestones and timescales for reaching a deal. (Paragraph 25)

Proposals for a Deal

6.We welcome the agreement of an Offshore Wind Sector Deal and the potential it to boost clean growth and deliver investment in parts of the UK beyond London and the South East, especially neglected coastal regions. The Government should pursue further sector deals that similarly seek to deliver environmental and societal benefits alongside the economic boost they can bring to industry. (Paragraph 29)

7.The Government’s misrepresentation of the steel sector’s proposals for a sector deal suggest that it is unwilling to meet the requests of the sector. The Government should return to discussions with the sector on a potential deal and provide clarity on the asks and offers that could enable the Government to meet its commitment to develop the UK steel industry, supporting a now commercially sustainable sector in a competitive global market. (Paragraph 33)

8.The Government has committed to ‘work closely’ with the retail, hospitality and tourism sectors to deliver the foundations of productivity. We recommend that the Government now deliver on this promise and publish an action plan for how it is going to work with low productivity sectors to provide the productivity boost they so urgently need. BEIS should ensure that other Government departments, including the Department for Education and HM Treasury, are fully engaged in developing and delivering this plan. (Paragraph 38)

9.The sectors we have covered in this chapter occupy very different parts of the economy and have widely divergent asks of the Government. They represent only a small sample of the sectors which, offered the chance at a bespoke deal with Government, have jumped at the chance of a sector deal. The Government has, in the past, indicated it is willing to engage with any sector that wants a deal, it should now ensure that no sector that has approached it with a credible offer is shut out of the sector deals process. (Paragraph 39)

Criteria for a Deal

10.The Government risks losing trust from sectors seeking a deal if it is not transparent about the criteria by which it is assessing proposals for a sector deal. We recommend that Government should publish updated criteria which accurately reflect what they are looking for in sector deals. Sectors should be able to judge whether they may be able to meet these without having to commit significant resources to a deal at his stage. (Paragraph 42)

11.Given the lack of transparency on the actual criteria for a deal, we are unable to recommend to Government a full set of potential new criteria; however, we recommend that in setting new criteria, the Government should ensure all sectors embed the Industrial Strategy’s five foundations of productivity in deal proposals and, at a minimum, include a requirement to deliver regional growth, increase skills in the sector, and provide support for the supply chain. (Paragraph 45)

12.The Government’s approach to sector leadership gives the unrealistic expectation that a single figure can represent diverse and disparate sectors, but that a trade body cannot effectively represent even a joined-up sector such as steel in the sector deal process. The Government’s current approach risks shutting out well-organised and coherent sectors from the sector deals process, because of its unnecessary focus on a single named negotiator. We recommend that the Government no longer refuses to negotiate with trade bodies in cases where they can demonstrably represent the breadth of the sector, including trade unions and small businesses. (Paragraph 48)

13.If sector councils are, as it appears to date, to be an integral part of all sector deals, the Government should make this clear in its criteria for a deal, and provide greater transparency on the establishment, membership and operation of such councils. We recommend that the Government lay before Parliament a statement setting out the establishment of any sector councils, and clearly publicise any vacancies or changes to membership. (Paragraph 51)

14.If the Government intends to use sector councils as a means by which sectors can be represented, such bodies should be required to meet the established criteria required for sector deals. We recommend that the sector councils should engage with the full breadth of the sector in order to maintain confidence including, but not limited to, workers and trades unions, small businesses and trades bodies. (Paragraph 52)

15.To encourage further sector deals and to increase business awareness of the content and process, the Government should make as much information as possible relating to the creation and monitoring of sector deals available to the public, including annual reports, metrics and summaries of the implementation plans created for each deal. (Paragraph 54)

16.We welcome the overdue establishment of the Industrial Strategy Council and the diverse range of voices it contains, and we recommend that the Council sets the metrics and criteria of success for sector deals as part of its work programme and publishes regular scrutiny of the process and deals agreed by Government. (Paragraph 55)

What difference can a deal make?

17.The Government has so far failed to demonstrate any analysis of the regional disparity and specific challenges that could be tackled by the use of sector deals. We recommend that the Government require an analysis of the regional benefits of sector deals as part of the negotiations process. The assessments should be published alongside the deals themselves and regional impact should be measured as part of the review process for each sector deal. (Paragraph 59)

18.While we welcome evidence that more is being done to engage the devolved administrations in sector deals, we are concerned that the BEIS’s London-centric workforce risks the Department failing to recruit staff with experience outside of the South East and failing to engage with business around the UK. An Industrial Strategy working in the interests of the whole country needs to be supported by a diverse UK-wide organisation that will enable the whole of the UK to proposer. BEIS should ensure that a greater proportion of staff, especially those working on policy issues, are employed outside London and the South East and should provide regular updates to the Committee on progress. (Paragraph 60)

19.We have been impressed by the work of the Catapult Centres that the Committee has engaged with in this inquiry. The Government should ensure that Catapults are involved in the negotiation of relevant sector deals, and where such catapults do not exist, should work with sectors to consider their establishment on a case-by-case basis. (Paragraph 63)

20.We have consistently opposed any attempts at undermining the National Minimum Wage, and do not believe that sectors should require a deal from the Government in order to provide ‘good work’. We welcome the proposals to date from low-pay sectors that have focused on improving skills. We recommend that the sector deals should not be sought or offered if they are being used as a mechanism for sectors to raise themselves only to meet basic employment standards. (Paragraph 66)

21.In agreeing sector deals, industry has the chance to set themselves ambitious targets to ensure they have a diverse and effective workforce and can improve the skills offer to their potential workforce. Catapult Centres, as Government-funded institutions, should be doing better on the front. We recommend that the business and Government follow the example the offshore wind sector has set by including targets for greater diversity as part of sector deals in industries which are currently failing in this regard. BEIS should work with the Department for Education to ensure that no sector of the economy is missing out on potential talent for their workforce. (Paragraph 68)





Published: 19 March 2019