Working to make government more effective


Rishi Sunak should drop his apologetic approach to an industrial strategy

Giles Wilkes says former business secretaries are right to call for the PM to focus on the UK’s long-term interests

Rishi Sunak, Prime Minister of the United Kingdom
Industrial strategy is a long-term game, and Sunak is consumed in the rather shorter-term one of trying to keep his fractious governing party within distance of the opposition.

Three former business secretaries have criticised the prime minister for failing to champion an industrial strategy – and Giles Wilkes says they are right to call for the PM to focus on the UK’s long-term interests

The national security adviser to the US President, Jake Sullivan, last month delivered a remarkable speech that launched an assault on what he calls “oversimplified market efficiency”. 25… Pursuit of this, according to Sullivan, drove the US to neglect its industrial base and become overdependent on geopolitical rivals for its essential supplies.

To the industrial strategist, the speech makes for a bracing read. For me, its spirit is summarised in Sullivan’s assertion that “we will unapologetically pursue our industrial strategy at home”. Just as bracing is the firepower the US has thrown at the objectives set out in the speech, with instruments such as the Inflation Reduction Act channelling hundreds of billions of dollars in subsidies and tax breaks at selected sectors, notably those needed to drive the economy closer to net zero. The effect can already be seen in an energetic response from business. 26 “US manufacturing commitments double after Biden subsidies launched”, Financial Times, 16 April 2023

The government’s industrial strategy feels furtive

Insofar as the UK is doing anything similar, it is best described as apologetic. On the one hand, Jeremy Hunt, the chancellor, says the government has an industrial strategy. On the other, sources close to Kemi Badenoch, the latest business secretary, say “we don’t have an industrial strategy as such”. 27 “Rishi Sunak’s lack of industrial strategy attacked by former business secretaries”, 18 May 2003 Evidence for the negative can be found in the prime minister recently getting rid of the department with Industrial Strategy in its name (BEIS) and breaking it into different parts: the Department for Science, Innovation and Technology, the Department for Energy Security and Net Zero, and the Department for Business and Trade. Two years ago, it abolished the Industrial Strategy Council that a previous government (one that I served in) had set up to give the prevailing strategy some permanence – with touching naivety, it turns out.

Yet the chancellor has half a point. He himself is championing five high-growth sectors and has deployed successive chief scientists to look into how regulations can be adapted to boost growth in various nascent technologies. 28, “The Chancellor went on to call on businesses in the key growth sectors of Digital Technology, Green Industries, Life Sciences, Advanced Manufacturing and Creative Industries to increase their investment in the UK, with the Chief Scientific Adviser Sir Patrick Vallance already leading work on how we should change regulation to better support safe and fast introduction of new emerging technologies.” The government has a strategy for quantum computing and a multi-billion pound plan to become a leader in carbon capture and storage. Studded through government documents are all kinds of goals normally seen in an industrial strategy: net zero emissions by 2050; an end to the sale of most petrol and diesel cars by 2030; a fully decarbonised power sector by 2035. Levelling up – which still forms the name of a department – is a kind of industrial strategy, redirecting economic activity towards particular places.

But whatever the government is doing, it feels furtive, apologetic, or maybe surreptitious, to use the word chosen by Greg Clark, the most recent business secretary to promote industrial strategy (2016-19). He is one of three to criticise Rishi Sunak for failing to get behind the agenda; the others, Sir Vince Cable (2010-15) and Lord Peter Mandelson (2008-10), each tried to promote a strategy, only to find a change in government undo their efforts. As a result, business has been confused, incentives towards long-term investment undermined, and key economic capabilities allowed to wither. No wonder that the UK has seen business investment lag behind the levels seen in its economic peers. 29 G Wilkes, “Business investment: Not just one big problem”,

Sunak’s laissez faire economic philosophy is at odds with an industrial strategy

It is easy to imagine the prime minister feeling aggrieved about these interventions. Industrial strategy is a long-term game, and Sunak is consumed in the rather shorter-term one of trying to keep his fractious governing party within distance of the opposition, with barely a year before a general election. It is particularly unfair to expect the UK to match the gargantuan efforts of the USA, just nine months after a bond-market meltdown forced the government into a change of leadership and return to future austerity. Nor should there be a demand for the UK to match the ambition of its American ally, which starts from a very different position on climate, faces different internal political pressures, and has its own economic security agenda. At less than a fifth of the US’s size, the UK must necessarily be more selective.

As for the accusation that the lack of an industrial strategy is why UK investment is so low, this is a Murder on the Orient Express style mystery, with far more than a single culprit. 30 I apologise for the spoiler but come on Others wielding the smoking gun include Brexit, a volatile capital allowance regime, the UK’s service sector dependency, and a half decade of political chaos.

The prime minister must wonder what the point is of winning power only to find himself forced into promoting an economic approach that he feels no love for. He made his economic philosophy clear in a speech in February 2022, which was more laissez faire in tone. 31 If he has an interventionist instinct, it is probably more apparent in his “Unicorn Kingdom” theme, which appears to be about helping fast-growing tech companies break through in Silicon Valley (a unicorn is term for a privately owned company worth over a billion dollars). 32 Though it is not clear

Governments need to govern with more than short-term electoral gain in mind

But Sunak should take seriously the criticisms of Clark, Cable and Mandelson. Too much time is wasted on the semantics of industrial strategy; often it is allowed to be defined by its antagonists, who portray it as an impossible attempt to second-guess millions of market signals. The truth is that every government has a strategy, either consciously or not, through act or through omission. Government actions influence the economy in many ways. Sometimes it is pointless to try to design these actions with some economic goal in mind but, at others, the scale of structural change is too significant for it to be treated blithely. Now is such a time, in particular because of the gigantic investments and regulatory acts that will characterise the transition to net zero. That its major trading partners think so forces the UK’s hand too. The UK will need to develop new capabilities and skills for this transition, identify where it stands to benefit from taking a leading role, and recognise gaps in its capacity. Hoping that market signals alone will prove sufficient would indicate too much faith in the “oversimplified market efficiency” that Jake Sullivan attacks.

This is not to say that Britain needs to ape Europe or the US. Both are more protectionist than the prime minister would find comfortable, trying to wrestle existing market activity to their shores rather than identify new opportunities. A strategy still needs the kind of tough examination that Sunak is known for deploying behind doors. Its fiscal limitations are not the only ones with which it must grapple. The UK’s long neglect of the policy has left its skills hollowed out, and it is reasonable to question the government’s ability to deliver effective interventions wherever it wants to. There is difficult but promising work to be done melding the agenda with the push for more devolution.

No doubt government strategists will sigh at all the work needed to support an industrial strategy and ask what political upside it promises. The answer is probably none. Whatever you imagine people marching in the street about, or slamming doors in the faces of canvassers, it is seldom your lack of a policy document for domiciling supply chains. But governments cannot govern as if electoral salience is their only compass or stop thinking of the long term when their immediate future – and perhaps survival – feels more pressing. The waning Labour administration passed the Climate Change Act in 2008 with just two years to go; Theresa May signed Net Zero into law with less than two months left in Number 10.  It is time for a less apologetic approach.

Related content

19 APR 2024 Podcast

Trust in government up in smoke?

Polling expert Will Jennings joins the podcast team to discuss what legacy Liz Truss has left the Conservatives in the polls.