Carolyn Fairbairn is CBI Director-General.
After a week in which a new President has been sworn into office and the Prime Minister has set out in more detail her Government’s aspirations for a new relationship with the EU, and how we will trade with the rest of the world, a UK Industrial Strategy may not be the first words on people’s lips in offices, cafes and pubs across the country. But that doesn’t make it any less important.
While no-one would question the seismic importance of a Trump White House and the upcoming Brexit negotiations, the Government’s plans for an Industrial Strategy – to be outlined in a Green Paper this week – will have an essential role to play in the future success of our economy.
The words ‘Industrial Strategy’ have unsettled policy-makers ever since the failures of the 1960s and 70s, with many associating it with unsuccessful attempts to pick winners during a period of relative industrial decline. The idea has since been re-booted, first under the Coalition government and now under Theresa May.
So why go down this road? Well, over recent years we have seen fundamental drivers of social and economic changes that need to be harnessed if we’re to prosper in the years ahead. Technological advances are accelerating, impacting what work will look like in the future. And while globalisation has delivered much for economies across the world, Western nations have increasingly struggled to share that prosperity: too many regions and people feel left behind, and we saw some of that disillusion manifest itself during the EU referendum and the US Presidential election.
A twenty-first century Industrial Strategy will be a landmark opportunity to set out ambitious plans for the UK economy in the decades ahead. It could help fix the country’s productivity problems and remove the regional inequalities that have dogged our country for generations, having an impact on the living standards, wages and the future opportunities of too many people. Brexit isn’t the only game in town when it comes to the business community’s priorities for 2017.
There are stark differences in productivity between not just UK regions, but also towns and cities only short distances away from each other. In the West Midlands, CBI research shows it is a third less productive than London, with Solihull the most productive area, and Wolverhampton the least – almost a quarter less productive. Importantly, this increase would be felt by families and communities across the UK, not just London and the South East. If each local area could increase its productivity at the same rate as the top performer in their respective region or nation, we could see an increase of almost ten per cent in the size of the UK economy by 2024.
Our starting place is a good one, though. The UK has a world-class mix of start-up, entrepreneurial, family, local and multinational businesses. The Government must capitalise on where some of our competitive sector strengths already lie, while combining this with a place-based approach that helps to tackle regional disparities and fosters closer cooperation between business and all arms of government.
This way of doing things has already helped create powerful business clusters that drive growth in different parts of the UK. For instance, the industry-led Automotive Council, set up in 2009, has provided a strong platform of collaboration in this field, resulting in the establishment of the Advanced Propulsion Centre in the West Midlands and much more besides – all in the heart of the UK’s world-beating automotive sector. Or take the Aberdeen City Deal, which will see investment of £250 million over the next ten years in the city, targeting the oil and gas sectors to help the industry adapt to the tougher environment it has been recently operating in, while making the most of the international expertise already found in Aberdeen given its rich history in the sector.
An Industrial Strategy will need to go hand-in-hand with better transport connections between our towns and cities that will widen any potential workforce. Improving transport links between cities in the North of England, for example, could provide access to a population of 16 million – the same number within one hour of London.
We also need to get better at improving the educational outcomes for our young people, and ensure businesses and education providers work in partnership to tailor local skills markets to business demand. Educational attainment of young people and the skills of the local workforce is a critical marker on how productive a region can be, so we must focus on building the right skills across the UK and producing the best opportunities for our young people.
A collaborative path to getting both Brexit and our own economy right through an effective Industrial Strategy will give us the best chance of creating a more prosperous and fairer society. The CBI and its members across every region and nation of the UK will have a fundamental role to play in providing insights, evidence and on-the-ground expertise in an open partnership with the Government.
A new Industrial Strategy can help tackle some of the root causes of inequality. It’s not about writing cheques to businesses and hoping for the best, it is about creating regional and sectoral centres of excellence that strengthen our economy, create higher wage jobs and help us trade across the globe.