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18 April 2017

A strategy for all

Industrial Strategy meeting 'Priorities for shaping the UK’s Industrial Strategy' was held at the Institution of Mechanical Engineers
In March, Andrew Allcock attended a meeting in London: ‘Priorities for shaping the UK’s Industrial Strategy’. Having a manufacturing theme, he picks out some so far less well-aired points

The government issued its green paper industrial strategy consultation document (https://is.gd/simare) on 23 January, with a response deadline of 17 April 2017 (https://is.gd/vateda). The paper sets out 38 questions that people might answer, by way of feedback.

In our December issue (https://is.gd/koduro), we ran over industrial strategy from the ‘60s on up and took in what was being said by organisations and politicians, following Prime Minister Theresa May’s announcement of such a strategy ahead of her first cabinet meeting last August. Since then, there have been official meetings up and down the country to garner input, both before and after the green paper’s publication.

The 132-page industrial strategy green paper says that government’s approach will be based on 10 pillars: investing in science, research and innovation; upgrading infrastructure; improving procurement; delivering affordable energy and clean growth; driving growth across the country; developing skills; supporting businesses to start and grow; encouraging trade and inward investment; cultivating world-leading sectors; and creating the right institutions to bring together sectors and places.

There has been less than fulsome feedback from the Business, Energy and Industrial Strategy (BEIS) Committee on that green paper and related action so far. It said in March: “The Prime Minister’s talk of a proper industrial strategy, with more active intervention into the activities of the economy, marks a significant shift from the approach taken by previous governments of the last 40 years, but so far there’s little evidence of the strategic framework or the co-ordination across government necessary to achieve ‘an economy that works for all’.”

UNCOMMITTED COMMITTEE

Added Iain Wright, MP, committee chair:“An industrial strategy can only begin to help tackle these issues if it recognises that an economy can have a direction of travel, has a vision and is ambitious, and [is] co-ordinated right across government. As a committee, we are concerned that with government announcements the approach seems to be ‘business as usual’ and a silo-based approach in Whitehall, which will not achieve the step-change the Prime Minister aspires to and that, as a result, the industrial strategy will fall short in providing a clear framework for industries and businesses to deliver future success.

The government must be bold, ambitious and visionary in developing its industrial strategy to ensure the sectoral and regional balancing to which it rightly aspires is achieved.” (Full report: https://is.gd/cetane.)

At the Westminster Forum event of last month – Priorities for shaping the UK’s Industrial Strategy – Tim Lord, director of industrial strategy at BEIS, accepted the possibility of multiple interpretations of the term ‘industrial strategy’, pointing out that the OECD has 31 definitions, adding:“And six months in, we are probably in the process of creating a 32nd.” The industrial strategy green paper was, he said, a mixture of consultation (green) and policy actions (white), while adding that the strategy will not be set in stone after Royal Assent.

Overall, it is about “improving living standards and economic growth by increasing productivity and driving growth across the whole country”. To achieve that, he said that there are three key challenges now and into the future: building on strengths, extending excellence; closing the gap between the performance of the best companies and the rest; making the UK the best place to start and grow and business.

Of actions already taken by government that fall within the developing strategy, he cited the extra £4.7 billion of R&D funding by 2021 (part of that will fund a new Industrial Strategy Challenge Fund that will direct some of that investment to scientific research and the development of a number of priority technologies); £500 million backing for technical education (see p7); the £23 million infrastructure fund (5G, transport); and £400 million of venture capital from the British Business Bank.

He exampled the government and industry working together to develop a strong UK position in battery technology as part of positioning Britain as a world leader in electric and connected and autonomous vehicle technology (the ‘Vehicle Technology and Aviation Bill’ that is making its way through parliament is part of this). Simon Evans, director, manufacturing and materials, Innovate UK, also instanced battery development and manufacture, highlighting the budget announcement of £270 million for UK companies to develop “disruptive technologies”, including driverless and connected cars, as well as electric vehicle battery technology.

Jaguar Land Rover’s I-Pace electric car will, in 2018, “bring thrilling Jaguar performance to electric vehicles”. Electric vehicle technology is being heavily promoted and supported by government, as the event underlined

But “what makes this industrial strategy different?” asked Lord rhetorically, noting that historian Lord Peter Hennessey has counted 18 such policies since Anthony Eden (PM 1955 to 1957). He said he would not “traduce or criticise previous strategies”, adding that Lord Mandelson of the last Labour government and Vince Cable of the previous coalition government had led good efforts. But this strategy is “genuinely across government” led by a Cabinet committee chaired by the Prime Minister, “a very strong Prime Minister with a handle on this”; that, he said, is quite different to previous efforts of the past. Second, it is “long-term and ambitious” with the government “asking for ideas”. Third, it is about the whole economy; it includes manufacturing and engineering, but is not just about them. Fourth, it brings regional and industrial policy together, where they have previously been separate. But the green paper has been criticised by a BEIS committee, as already noted. And, as it happens, it had been the chair of that very committee, Iain Wright, who had initially been scheduled to speak, not Lord.

HIGH VALUE MANUFACTURING

Also speaking from the government side, Innovate UK’s Evans talked about research funding, how its management was to be improved, and about the High Value Manufacturing (HVM) Catapult’s success.

As of April 2018, Innovate UK, the seven research councils and the Higher Education Funding Council for England will be folded into UK Research and Innovation (UKRI). The case for this was set out last June (https://is.gd/vixuzu) – this “offers an opportunity to strengthen the strategic approach to future challenges and maximise value from government’s investment of over £6 billion per annum in research and innovation”.

(A recent House of Commons’ Select Committee [https://is.gd/ebamub] said that UKRI “should take a pivotal role in developing and sharing good practice in commercialising university research”.) And on the ‘industrial challenge’ fund, Evans said that manufacturers had been the largest constituent at recent events.

Moving onto the HVM Catapult, whose seven centres take basic research and then work with industry to bridge ‘the valley of death’ to bring new products/processes to industrial readiness, Evans cited two recent successes that atest to the drawing power of such facilities, specifically the Advanced Manufacturing Research Centre with Boeing (AMRC) and the McLaren and Boeing wins. The McLaren move relates to reshored Austrian activity linked to composite car part production at a new facility next to the AMRC (https://is.gd/uverij); the other is a new, multimillion-pound production facility, also to be built alongside the AMRC and the first Boeing manufacturing facility in Europe (https://is.gd/ujudur).

Returning to the strategy more generally, four similar points of critique were made by: EEF chief economist Lee Hopley; the CBI’s Emma Roberts, head of industrial strategy; Tim Frenneaux, deputy chief operating officer, York, North Yorkshire and East Riding Local Enterprise Partnership (LEP); and Professor Simon Collinson, chair, Chartered Association of Business Schools, and deputy pro-vice-chancellor for regional engagement, Birmingham University.

Hopley, who more broadly drew on the EEF’s recent ‘Manufacturing Ambitions’ report (https://is.gd/isedur), added in addition that there was a need for greater clarity in the strategy as to what success looks like: “In 2030, we want to [be able to] look back and answer, ‘did we achieve the things the industrial strategy set out to achieve?’”

And clarity of what success looks like also goes to the heart of visibility of government department buy-in, she added. But Hopley was “optimistic” that the strategy has the necessary foundations.

Roberts said: “The ‘how’ is just as important as the ‘what’. How is it going to administered, how is it going to be project managed…there is a real issue around ‘churn’ of industrial strategy, we need to know that this is going to last.” She suggested two ideas: set up something like the Office for Budget Responsibility to independently report on progress or mandate goals, as per the Climate Change Act.

Frenneaux was also keen to have clarity and a goal-focused approach, while also adding that the performance of the 38 LEPs is not easily compared. He cited his LEP’s £50/business intervention cost, for example, but asked the question “what does good look like?” He also pointed to a need, post Brexit, to know how EU funding would be replaced, with an understanding of where that had been good and what to support going forward.

Collinson said that precision was required in any strategy, rather than a blanket sectoral approach. Precision is required at sector, regional and firm level. Within sectors, what is key technology for the future and what is not; at regional level, what are the real strengths, as opposed to those claimed by LEPs; and at firm level, as within any sector, some firms in some sectors in some regions are high-performing and others are low-performing.

He also highlighted that commercialisation of new products resulting from research funding requires good management in the commercialising companies, and that business schools are the places that develop and disseminate that expertise, but they are not much talked about and their funding has been reduced.

Professor Steve Evans, director of research in industrial sustainability, Institute for Manufacturing, made some interesting observations. First he tackled the ‘sector deals’ encouraged by the green paper to mimic the success of government-industry partnerships in the aerospace and automotive areas. He doubts duplication, easily, for other sectors; the construction industry and food sectors, two of the biggest, are “struggling to get their act together” – there needs to be a more proactive approach to creating such deals, he said. Evans also suggested that an energy strategy was missing. By being smarter about energy use such things as the Snowdonia Pumped Hydro would be unnecessary, with the alternative cheaper. Toyota’s UK operation’s year-on-year efforts in reducing energy per car made were held up here. Similarly, smarter use of other resources is necessary. Indeed, on the central plank of boosting productivity, he stressed that labour was just 10% of total manufacturing cost, saying that more effort should be made to attack other cost factors (water, energy, materials).

In conclusion, he said that moving the performance of average companies just halfway towards the best delivers “£10 billion on the bottom line at no capital cost”, generates “300,000 jobs in manufacturing” and removes “4.5% of CO2 emissions”.

Box item

Others UK regions have manufacturing strategies

As Tim Lord highlighted, although called an industrial strategy, the government’s push is economy wide – there are just seven mentions of ‘manufacturing’ in the main body of the 132-page document. But others’ strategies are more clear-cut on the matter. At the London event, Stephen Kelly, chief executive officer, manufacturing Northern Ireland, stated the province’s aim (see https://is.gd/otecuv) of boosting manufacturing’s percentage of GDP to the EU target of 20% – NI’s is 14% and the EU’s is 16%. Scotland also has a strategy (https://is.gd/bokefe) that aims for the same figure. No such goal is set out in the government’s green paper, but an excellent analysis of the UK’s industrial situation has been published by the Industrial Communities Alliance (www.industrialcommunitiesalliance.org). It says: “Quite simply, it is time for government to say enough is enough: we hold the line here [10% of GDP]. The UK economy needs a large manufacturing sector to deliver sustainable prosperity, so it is vital to hold on to what we’ve still got. That doesn’t mean keeping every factory, but it does mean that the capability to produce in any major sector should not be lost and that anchor companies – the drivers of local and national supply chains – should be nurtured. The reshoring of production from abroad should also be encouraged.”


The Industrial Communities Alliance has an excellent analysis


First published in Machinery, April 2017

Andrew Allcock

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