Chancellor Rishi Sunak and business secretary Kwasi Kwarteng have written an open letter to businesses, explaining how the 2017 Industrial Strategy (IS) is morphing into “our plan for growth”.
The letter follows publication on March 3rd of Build Back Better – our plan for growth on Budget Day, March 3rd, and criticism of dropping the IS and the accompanying Industrial Strategy Council, which has been replaced by a larger Build Back Better Council.
The IS was a key policy of Theresa May’s government and her business secretary, Greg Clark. By contrast, Kwarteng told Clark in the House of Commons this month that the IS was “a pudding without a theme”, a reference to the way Winston Churchill is said to have once rejected a dessert.
Last week saw publication of the final annual report of the IS Council. Defending the IS, it says: “In the light of Covid, the case for a strategy to boost the productivity, prosperity and earning power of people throughout the UK is stronger than ever. That was the aim of the UK Government’s 2017 Industrial Strategy. It has now been replaced by the recently published Build Back Better: our plan for growth (Plan for Growth). Whether it is called an Industrial Strategy or a Plan for Growth, the basic premise is the same – a programme of supply-side policies to drive prosperity in and across the economy.” The report criticises the new policy for being narrower in outlook.
The new letter summarises the government’s approach.
Much has changed since 2017. “Creating and supporting jobs and helping to drive growth in existing, new and emerging industries is the government’s central focus”, the letter says.
“The plan for growth builds on the best of the Industrial Strategy from 2017 – it refreshes and goes further.”
Build Back Better – our plan for growth (BBB) has three pillars of investment - in infrastructure, skills and innovation. It identifies three priority objectives: uniting and levelling up; transitioning to net zero; supporting our vision for Global Britain. The emphasis on net zero is even stronger than in the IS but is a natural evolution; this government has paid tribute to May’s for fixing the 2050 target in law.
Sunak and Kwarteng’s letter confirms that the Industrial Strategy’s existing nine sector deals (including aero, AI, auto, construction and tourism) will be continued with. But they run out within the next 18 months. The IS’s four Grand Challenges – Artificial Intelligence and Data, Ageing Society, Clean Growth, and Future of Mobility - are being reviewed.
Their letter commits to government helping to drive growth in existing industries, as well as new and emerging industries. This was not mentioned in BBB, but the government can point to the Help to Grow – Digital and Help to Grow – Management schemes, currently being developed, and aimed at SMEs across the economy.
One of the most significant shifts from the IS to BB is said to be from focus on productivity to jobs and growth, and from specific industries (sometimes called “silos”) to a more horizontal, cross-economy approach.
There is no mention of Made Smarter. Juergen Maier, the former Siemens UK chief executive and ISC member, and champion of the “fourth industrial revolution”, tweeted on March 30 that Kwarteng told him that “the best parts of the Industrial Strategy like Made Smarter will become part of the plan for growth”. There is currently no additional funding for Made Smarter and the extent of any commitment is not clear.
The letter from Sunak and Kwarteng serves to highlight that the plan for growth still is short of detail. A raft of strategies is to be published, including on innovation but also AI, hydrogen and space.
A challenge for the manufacturing and engineering sector will be to gain specific policy initiatives and funding to make that commitment particularly valuable in their sector.