The government needs to clarify the position of industrial strategy within its growth plan

It is the essence of industrial strategy that it is selective, however, and a great many will have to be disappointed. To resolve this confusion is going to take some skilful handling.  There are five steps the government should take to give itself the best chance of success.

Be focused and selective

First, the government must not buckle in the face of so much eagerness to be “in” the industrial strategy. The scale and multi-faceted nature of growth policy – the busy-ness of that whiteboard –  is precisely why the industrial strategy bit has to be focused, goal-oriented, closely monitored – and just a part of the whole. As we have written repeatedly at the Institute for Government, it needs tight edges. Industrial strategy must be a hard core in the middle of the growth mission, containing only those industries where the case has been made with overwhelming conviction. It is where one should expect to find plans for defence, for energy and highly advanced technology sectors: those where government interests and capabilities are unavoidable and the effect on the rest of the economy undeniable. 

If a strong case is not made, then no matter how large, well-connected or esteemed the sector may be, the government should not be reluctant to generate a minimal response. 

Consider every possible policy lever

Second, this highly selective approach should be applied to target sectors – but not tools. Invest 2035 has been clear that a wide variety of policy levers must be considered, and the right ones will depend entirely on the situation. Nothing from that crowded whiteboard – including tax policy – should be off the table.

Keep listening to companies outside the industrial strategy

Third, the government needs to be clearer that not being included in the industrial strategy does not mean that the “spurned” industry or company is unimportant, nor that its concerns will go unheeded. True, most of growth policy has to concern the wider economic environment; most companies say that all they really want are predictable taxes, decent infrastructure, a supply of skilled labour and accessible finance and so on. But recognising this does not mean ignoring all signals from an individual company or sector. The government needs information from all corners of the economy in calibrating its policies; regardless of whether the respondents make the cut, it should take seriously all the responses in the current consultation, and use them in developing wider growth policy. This just doesn’t have to lead to some kind of intentional government strategy for the sector, with all the associated goals, milestones and targeted interventions. 

Create a system of business engagement

Fourth, as a key part of this, the government needs to follow through on its commitment to create an effective system of business engagement. In Invest 2035 this is presented as a key part of the industrial strategy, but the value would be felt far beyond those carefully selected sub-sectors. There needs to be a large increase in business investment. Much of it may lie outside of the chosen sectors but nevertheless require a responsive government to secure. Multinational companies and investors in particular rely on extensive engagement with the state to deploy capital with confidence. It is a good sign that the Office for Investment (OFI) has been strengthened, and the government is known to be impressed by the Harrington Review into how to encourage more foreign direct investment. But doing this can run against the instincts of parts of Whitehall, the Treasury in particular. 

The fanfare around the industrial strategy has been such that businesses may be dissuaded from putting in the effort to engage with the government if they do not think they are part of a favoured sector. This impression must be quashed. The beefed-up OFI must be clear that the door is open to all investment and market-opening proposals. It can’t be like a bouncer at a club, barring a guest with “sorry, you’re not on the list”. 

Speak to individual companies 

Fifth, the government must resist the temptation to try – maybe in the name of diary-management – to do as much engagement as possible through business representatives rather than with companies. It is no substitute to hearing from directly from whoever is wielding the chequebook. Britain has excellent business organisations, but they have to reflect the position of a wide membership, and this is not always the best way to get to the heart of specific problems holding up an investment. 

The question of how the rest of the growth mission needs to be organised awaits a longer piece. Resolving the part of the industrial strategy within it is just one early priority. Doing this will help to reassure business that the discord of the past few weeks is not a harbinger of the next four years.