Post-pandemic economic growth: Industrial policy in the UK Contents

1The end of industrial policy?

Table 2: Key features of the 2017 Industrial Strategy & 2021 Plan for Growth

Features of industrial policy

2017 Industrial Strategy

2021 Plan for Growth

Mission led challenges

x

Horizontal policy interventions

Sectoral support

Local industrial policy

?

Independent scrutiny

x

Industrial Strategy abolished

14.The Plan for Growth announced at the March 2021 Budget signalled the end of the 2017 Industrial Strategy (IS). Speaking in the House of Commons on 8 March 2021, the Secretary of State for Business and Industrial Strategy, Rt Hon Kwasi Kwarteng MP, said:

I have read the industrial strategy comprehensively, and it was a pudding without a theme, in my view. I feel very strongly that the conditions of 2017 do not apply to 2021, and I am very pleased to announce to the House that we are morphing and changing the industrial strategy into the plan for growth.10

15.This contrasted with the evidence we received which showed that businesses across multiple sectors were supportive of the IS as a means of developing a structured relationship between business and Government where both parties work towards an achieved objective. Witnesses to our inquiry and participants at our roundtable discussions were, overall, supportive of the broad approach taken by the Industrial Strategy. The CBI said: “The fundamental building blocks of the Industrial Strategy remain the right ones for the UK’s long-term competitiveness.”11

16.Some witnesses called for a revised focus in light of Brexit, Covid-19 and the Government’s net zero commitments, but said these revisions could be accommodated through a refreshed Industrial Strategy.12 Anthony Walker, Deputy Chief Executive Officer of techUK, said the Government and industry “should be building on the structure that we have rather than suddenly ditching large parts of the existing strategy.”13 Commenting on the Plan for Growth, Professor Mariana Mazzucato, writing in conjunction with colleagues from the UCL Institute for Innovation and Public Purpose, said today’s circumstances and the Government’s objectives are not incompatible with the Grand Challenges established in 2017.14

17.The Government noted that some features of the Industrial Strategy such as sector deals will be retained, but the future of the cross-cutting ‘mission’ oriented elements remains, at present, uncertain, with the Government saying it “will evolve the Grand Challenges and Missions programme to ensure they meet the needs of our technology innovation landscape”.15 MakeUK, representing the manufacturing sector, responded to the strategy’s abolition by highlighting serious concerns about the future of industrial policy in the UK.16

18.Andy Haldane, Chair of the Industrial Strategy Council (ISC), told us that the significance of the Industrial Strategy was that it was a ‘strategic’ set of measures which amounted to more than a disparate set of policies.17 The Secretary of State told us that the Plan for Growth would be more “focused and have a bit more direction” but did not specify how, in practice, it would look and feel distinct from the 2017 Industrial Strategy.18 However, in its 2021 report the Industrial Strategy Council found “180 policies and commitments in the Plan for Growth. That begs questions about the scope and scale, and hence likely success, of this plan”.19 Some of the initiatives within the plan have identified funding attached, whilst others are simply commitments to publish further strategies.20

19.The Secretary of State said that the Plan for Growth has a greater macro-economic focus than the Industrial Strategy which, he argued, had been spread too thinly in its sector-by-sector approach.21 However, he maintained that the Plan for Growth did not represent a fundamental shift in policy:

I disagree with this idea that somehow we are ending the industrial strategy and then starting something else. A lot of the elements of the industrial strategy, the sector deals you have mentioned, some of the sector deals we are negotiating at the moment, are still in place.22

Making the case that the Plan for Growth will carry over themes of the 2017 Strategy, he added that a “lot of the good elements of the industrial strategy are morphing into other strategies and are being branded differently, but a lot of the substance of what we are trying to do has stayed the same”.23 The Secretary of State’s insistence, however, that the Plan for Growth does not represent a sea change in policy sits somewhat uneasily with his comment that the “world of 2017 no longer exists. We are in a totally different era.”24

The Plan for Growth

20.The Plan for Growth seeks to address three pillars of growth – infrastructure, skills and innovation, and there are policies and funding commitments within the plan related to each area. However, the Industrial Strategy Council’s analysis, published in their 2021 annual report, illustrated that these initiatives are fragmented, and, in the case of skills the Government’s plans, so far, lack scale and scope.25 The Council warned in its 2021 Annual Report that in and of themselves, policies to improve infrastructure, skills and innovation do not offer sufficient conditions for improvements in productivity and living standards which lie at the heart of industrial policy:

It is well-recognised that growth in living standards and productivity typically relies on a broader set of “capitals” than the traditional ones. That includes measures of natural capital (nature and the environment), social and human capital (trust, relationships and well-being) and institutional capital (both national and local institutions, suitably co-ordinated), among others.26

21.In combination, the Plan for Growth’s three pillars and the set of capitals outlined by the Industrial Strategy Council reflect much of what underpinned the Industrial Strategy, although it should be noted that there is no oversight or measure of achievement against the ‘broader capitals.’ The focus on Grand Challenges, however, is absent and the Government’s policy—aside from reiterating its commitments to the “levelling up” and net zero agendas—appears to de-emphasise the ‘mission-led’ approach to growth advocated by experts such as Professor Mariana Mazzucato.27 Unlike the 2017 strategy with its Local Industrial Strategies, the Plan for Growth also does not include an explicitly local or regional structural element.28

22.The economic outlook has been fundamentally altered by the Covid-19 pandemic and by Brexit, and today’s circumstances therefore require a revised focus in industrial policy. However, some of the foundations and long-term challenges that the 2017 strategy sought to address are still relevant today and should be carefully considered in the new Plan for Growth.

23.The Government now has an opportunity via its Plan for Growth to deliver a more narrow and focused set of polices than the 142 that emerged from the 2017 strategy. We note that the Industrial Strategy Council’s analysis suggests the Government has not started well in this regard. The Government should refine a set of prioritised policies which have sufficient scale and scope to make progress against the Government’s strategic objectives. Government should publish the metrics it will measure to show progress in the delivery of these strategic objectives.

Cross-government delivery

24.It is not yet clear whether the Government intends to retain a strategic industrial policy or how it will deliver against the objectives of the Plan for Growth. We heard from the Industrial Strategy Council that to succeed industrial strategy must be owned across Government departments—something the 2017 strategy did not always achieve—but it has yet to be demonstrated that the Plan for Growth provides a specific enough vision to achieve cross-Government buy-in and coordination. However, the cross-cabinet National Economy and Recovery Taskforce which is chaired by the Prime Minister offers a potential structure to take forward more coordinated activity.29

25.The ISC’s 2020 Annual Report found limited evidence of co-ordinated decision making between BEIS and other Departments when aspects of the Industrial Strategy overlapped with those Departments’ policy areas. It argued the Grand Challenges in particular provided “an effective vehicle” for improved policy coordination given their scale and scope, but that this coordination was not yet happening.30 Professor Dame Nancy Rothwell, a member of the Industrial Strategy Council, outlined the importance of policy being owned across all of Government:

the industrial strategy has to be pervasive across Government Departments. I do not see it as being owned by any one Department, because it influences such important aspects of business, trade, health, skills and infrastructure across all of them.31

26.Many of our witnesses agreed with Dame Nancy’s analysis. Heriot-Watt University reported “limited evidence of impact” where activity had required “engagement from other Government Departments”.32 Discussing the effectiveness of the Life Sciences component of the Industrial Strategy, the CBI said cross-departmental working could be improved as the “Life Sciences Council is well attended by the Department of Health and Social Care and BEIS but not the Treasury or DfE.”33 The Productivity Insight Network offered a stark critique of cooperation across Whitehall:

The Industrial Strategy is not really taken very seriously in HM Treasury, and MHCLG are not quite sure exactly where it fits in with their remit, as is the case for the Department for Work and Pensions, the Department for International Trade, the Department for Education and UKRI.34

27.Gareth Stace from UK Steel told us that the steel industry’s efforts to negotiate a sector deal had failed due to a lack of cross-Government buy-in. In particular, policy modifications UK Steel argued for in relation to electricity prices and business rates were “within the gift of Treasury” but BEIS was unable to persuade the Treasury to introduce changes which could have helped stimulate a sector deal.35

28.Addressing concerns about the effectiveness of cross-departmental working, the Secretary of State’s comments were somewhat equivocal. He argued that Government departments had worked well together in the past but that they could do better.36 It was telling, however, that in introducing the benefits of the Plan for Growth, the Secretary of State observed that the Industrial Strategy “had no real Treasury buy-in.”37

29.Prior to confirmation that the Industrial Strategy in its existing form would be scrapped, former Secretary of State, Rt Hon Greg Clark MP, suggested all government policy need not reference the Industrial Strategy, but there should be an ambition to “internalise” the Strategy within government so that it becomes “part of the wiring of Whitehall and policymakers, because they have been convinced and it has been embedded”.38 He identified skills policy as an area where he had found this difficult to achieve and explained that “to truly join this up, it sometimes means budgets from one Department being deployed in a way that might not have been among the narrower priorities of that Department.”39 Mr Clark added that it was always a “struggle” to persuade the Department for Education and its predecessors that joining in a “full-hearted way with the agenda that the industrial strategy set out, rather than preserving its autonomy, was in its interest.”40

30.Addressing the Government’s skills proposals set out in the Plan for Growth, the ISC emphasised that cross-government working must complement co-production with the private sector and third sector groups. They concluded that to make progress there would have to be much closer working between the Department for Education, the Department for Work and Pensions and BEIS as well as “strong engagement with private businesses, the education sector and trades unions.”41

31.Coordinated and strategic industrial policy is required if the Government is to meet its growth, levelling up and net zero ambitions. It appears that many aspects of the Plan for Growth will be overseen by a cross-cabinet committee chaired by the Prime Minister and the Committee welcomes this opportunity to apply the highest levels of political priority to the problems the Industrial Strategy was trying to solve.

32.Whether labelled Industrial Strategy or Plan for Growth, industrial policy in the UK will require scale and a long-term commitment from Government to be successful. In response to this report the Government should set out:

10 HC Deb, 9 March 2021, col 679 [Commons Chamber]

11 Confederation of British Industry (CBI) (INS0016), p 1

12 University of Glasgow (PEG0296), Confederation of Paper Industries (INS0008)

13 Oral evidence taken on 8 October 2020, HC (2019–21) 674, Q44

14 UCL Institute for Innovation & Public Purpose, Building Back Worse, 23 March 2021 (accessed May 2021)

18 Oral evidence taken on 13 April 2021, HC (2019–21) 301, Q153

19 Industrial Strategy Council, Annual Report, (March 2021), p 5

20 For example, the Industrial Strategy Council noted £27bn of capital investment on economic infrastructure in 2021–22; £14.6bn of direct public funding attached to the R&D roadmap in 2021–22, and £12bn, including £3bn of new money, allocated to reducing emissions from energy, buildings and transport.

21 Oral evidence taken on 13 April 2021, HC (2019–21) 301, Q153

22 Oral evidence taken on 13 April 2021, HC (2019–21) 301, Q154

23 Oral evidence taken on 13 April 2021, HC (2019–21) 301, Q154

24 Oral evidence taken on 13 April 2021, HC (2019–21) 301, Q155

25 Industrial Strategy Council, Annual Report, (March 2021), p 29

26 Industrial Strategy Council, Annual Report, (March 2021), p 26

28 This point is explored further in Chapter 5.

29 Announced in the Plan for Growth, the National Economy and Recovery Taskforce is a cabinet committee chaired by the Prime Minister which will “ focus on catalysing growth, levelling up across the UK and driving public service performance and delivery.”

30 Industrial Strategy Council, Annual Report, (February 2020), p 5

32 Heriot-Watt University (INS0018)

33 Confederation of British Industry (CBI) (INS0016), p 6

34 Productivity Insight Network (INS0048)

36 Oral evidence taken on 13 April 2021, HC (2019–21) 301, Q157

37 Oral evidence taken on 13 April 2021, HC (2019–21) 301, Q153

41 Industrial Strategy Council, Annual Report, (March 2021), p 29




Published: 28 June 2021 Site information    Accessibility statement