Industrial relations: how to create an effective industrial strategy

Theresa May’s machinery of government changes signified more than just a new focus on Brexit: the transformation of BIS into the Department for Business, Energy and Industrial Strategy (BEIS) suggested a return to industry-focused policymaking. And in his first announcement as Business Secretary, Greg Clark also promised a ‘comprehensive industrial strategy’. So if the end-goal is an industrial strategy, how does the Government work better with industry? Start talking Dialogue with industry is crucial in developing and delivering a comprehensive strategy. And this should be based on a strategic dialogue with business - that is, ongoing engagement focused on identifying and mitigating long-term challenges, not just firefighting immediate difficulties. Fortunately, the building blocks of a strategic dialogue with industry are already in place. While industrial strategy fell out of favour under the previous Business Secretary, the Coalition established 11 ‘sector councils’ to inform its industrial strategy and facilitate deeper engagement with key sectors of UK industry. These councils bring together representatives from key sectors of industry, including Aerospace, Construction, and the creative industries, and relevant senior government figures. Their purpose is to identify barriers to growth, and inform Government policies. Dialogue with industry will be crucial in preparing for the upcoming Brexit negotiations - to get the best deal for UK plc, officials will need a detailed understanding of how different parts of UK industry will be affected. The new Business Secretary should consider how to establish and maintain an ongoing dialogue with industry to inform Brexit preparations. Sector councils could form the basis of such a dialogue, offering some lessons in how to develop and maintain effective strategic dialogue with industry. Look beyond the usual suspects Bringing together voices from across UK industry allows Government to get a bigger picture of issues facing them. Many sector councils include representatives from a mix of SMEs and larger companies, to ensure varied interests are represented. Including a mix of voices and companies mitigates the risk of Government being captured or influenced by a dominant interest group. It’s also important, particularly in the early stages of establishing a dialogue, to have the right representation on the Government side. Engagement from politicians at the highest level – ideally the Business Secretary himself - will be key in demonstrating to industry that Government is committed to developing an ongoing relationship. Don’t go back to square one This kind of open dialogue requires a certain level of trust to allow for frank discussions of industry-wide issues. And developing trust takes time, particularly when multiple players are involved. In the case of sector councils, lead times to get to that point of mutual understanding and trust took up to 18–24 months. There isn’t time for Government to develop new relationships and forums from scratch, particularly if one of their roles is to feed into Brexit negotiations. Before trying to reinvent the wheel, the new Business Secretary should consider how to build on existing forums and relationships, such as the sector councils, to achieve his objectives. Share what you learn across Government Strategic dialogue gives officials access to knowledge and expertise, which can be used to design more targeted and effective policies. However, issues facing industry often require co-ordination with lots of different Whitehall departments. One potential downside of the sector council approach is that it encourages silos around each sector – for example, we found that there was little communication between councils or between policy teams on cross-cutting areas, like digital. It is vital that the outputs of strategic dialogue are shared not only across the new department, but also with others such as the Treasury. This will also be true for any discussions relating to Brexit negotiations – conversations held between BEIS and industry representatives must be shared with those preparing the UK’s negotiating position, to ensure that businesses are properly engaged in the negotiating process. Don’t ignore the risks Close cooperation with business is not without risks. Government can be captured by narrow interests, and under-developed industries can be muscled out in favour of more established voices. But, as the experience of sector councils suggests, a well-managed strategic dialogue can be beneficial to both sides: policymakers have a ‘sounding board’ to test policies and ensure investment is properly targeted, and industry can guide government intervention to tackle the most pressing challenges.

Further reading: Creating and sustaining an effective strategic dialogue with business