Both Brexit and the long-delayed industrial strategy are about government seizing the tools of state control. But the Johnson government has failed to explain how it will deploy the economic freedoms promised by Brexit to build a stronger UK economy.
This report sets out key principles for building a successful industrial strategy.
After a decade of weak growth and 2020’s record-breaking recession, the government’s desire for a transformative industrial strategy is easy to understand. Yet few details of how the government means to wield its new-found sovereignty have emerged beyond increased science spending, a poorly defined agenda of ‘levelling up’, and positive noises surrounding the target of net zero.
To build a successful industrial strategy, ministers must guard themselves against the missteps that often occur when politics and economics mix. Their approach must embrace, not rail against, the constraints that restrict ad hoc intervention, such as state aid rules and Treasury challenge.
The early signs are not good. They point to a government pursuing a strategy that chases technological winners and picks favoured companies and constituencies that reflect political motivations, rather than addressing economic imperatives.
Recognising government fallibility as much as opportunity, the paper calls on decision makers to:
- Put edges around the industrial strategy: A promise to help every corner of the economy is the opposite of strategic. Choices must be made, and not on the back of which sectoral body lobbies the hardest.
- Embrace competition: There should be no contradiction between a well-designed industrial strategy and adherence to free market principles.
- Avoid becoming obsessed with creating a tech superstar: A home-grown corporate champion is neither necessary nor sufficient for industrial success.
- Adopt a systematic, institution-based approach: The private sector, which is what will ultimately deliver industrial change, needs a stable structure of incentives and rules to plan against.
- Create guard-rails around political decision making: Politicians and their appointees are not there to make commercial decisions; their ideas will reflect bias and the arbitrariness of political access.
- Commit: Business timescales outlast the political cycle, so an industrial strategy has to be constructed in such a way as to outlast its architects.