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The UK’s new Industrial Strategy: a modern foundation for economic growth


November 27, 2017 Robbie Tilleard, Nida Broughton and Elisabeth Costa

Traditionally, Industrial Strategy conjures images of furnaces and molten metal. In turn, the language of economic policy – productivity, innovation, competitive advantage, regulation – hardly sparks the imagination.

Today’s launch of the UK Government’s Industrial Strategy White Paper should help shift these perceptions. The Strategy is formed around five foundations (ideas, people, infrastructure, business environment, places), four grand challenges (AI and data economy, future of mobility, clean growth, ageing society) and a series of new ‘sector deal’ partnerships between government and industry.

In the BIT offices, the White Paper’s modern approach has even been described as retro cool, like a re-engineered MINI automobile. The fundamentals remain, but it has been updated for a new century with a more dynamic and human-centred design.

Three themes that run through BIT’s work and underpin the Strategy are particularly promising.

Experimentation and evaluation

As we have said before, testing, learning and adapting programmes to understand what works is still a novel approach in economic policy. The Industrial Strategy goes some way to rectify this. Its new independent Industrial Strategy Council has a mandate to commission specific evaluation projects. Pilots will be launched and local institutions, like devolved mayors and Growth Hubs, are tasked with trying new approaches to business support and growth. We hope this, alongside institutions like the What Works Centre for Local Economic Growth, will help us build a new evidence-based approach to boosting economic growth.

Using data to improve government services

In 2017, over a fifth of British small and medium enterprises use or expect to use faxes to sell their goods and services. Our very own NHS remains the world’s largest purchaser of fax machines. The government has a wealth of data on business performance and productivity. Better use of that data, at the heart of the new Strategy, can help us target businesses at the right time, with the support they need. So, for instance, we could target productivity laggards with technology training at the moment they might be most open to support. In turn, initiatives like the new £20m GovTech fund will help make public services more effective.

Making markets more dynamic

Behaviourally-based market failures lower competition and product quality. We overpay for mobile phone contracts, fail to switch energy providers and too often don’t select the best deal even when it is available. Creating easy and transparent feedback mechanisms between businesses or between businesses and consumers, can rectify this failure by de-shrouding the best quality providers. The White Paper embraces this approach. It highlights the need for competition, suggests experimenting with the government’s ‘Crown Marketplace’ and announces a new pilot to improve feedback in the market for business advice. These are also areas we expect to see covered in greater detail in the upcoming green paper on protecting consumer interests.

Beyond these underlying themes, there are interesting ideas in the White Paper that we hope will rev into gear as the new MINI hits the implementation M3. These include:

Innovating at a user and local level

In 2010, Nesta found 8% of UK consumers over the age of 15 had created or modified a product to better meet their needs. Innovation guru Eric Von Hippel has pointed out ‘companies get too much credit for product innovation…and users get too little’. This is why we welcomed the creation of Nesta’s Inventor Prize and are interested in the White Paper’s funding for local innovation. As the Strategy’s R&D programmes take shape we look forward to seeing how makerspaces, at-home inventors and local innovation might form a part of achieving its goals.

Getting businesses and consumers on board

In terms of out-of-date technology use, faxes are the tip of the iceberg. Blank floppy disks and tape cassettes still appear on the British import list in quantities that go far beyond any vintage collection. The future is here, goes the saying, it is just not evenly distributed yet. The White Paper’s call to diffuse technology and achieve ambitious challenges will rely on industry and consumer adoption. Our experience suggests preaching the benefits of new technology is unlikely to be enough. We hope the implementation phase thinks innovatively about how to improve take-up and spread the benefits of technology across the UK.

Managing the managers

Management skills could account for a quarter of the productivity gap between the UK and the US. Work by the Chartered Management Institute finds four out of five British bosses are ‘accidental managers’ with no formal training. Basically, we’re a nation of David Brents. To solve this, the White Paper calls on Charlie Mayfield’s Be the Business to improve ‘productivity through enhancing management practices and improving skills’. Our work shows organisational behaviour interventions can be complex and risk causing worse outcomes. Therefore, it is important any new programmes are carefully tested and evaluated as they are rolled-out.

The industrial strategy lays out a modern foundation for economic growth. Importantly, it provides space to innovate, experiment and learn. It should also serve as an example for other countries to follow. Despite unique challenges, the UK is not the only country grappling with low productivity growth. Australia recently released a comprehensive report on policies to improve productivity. In New Zealand, stagnant productivity growth has been referred to as a ‘productivity recession’. We work with governments grappling with productivity challenges across the globe. They, like us, will be looking forward to seeing how the new MINI tests on the road.

BIT advises the UK Government on economic policy.

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