Since the start of the year, the flow of stories highlighting Britain’s fading industrial prowess seems to have reached warp speed. The number of new cars made in the UK has sunk to its lowest level since 1956. Britishvolt, the country’s answer to Tesla, collapsed into administration. The struggling steel sector was the subject of a potential government bailout. Meanwhile, as the clean tech race between the US, the EU and China hots up, the lack of UK response remains conspicuous.
The routine approach from British politicians to sectors in need of attention has been to lament current performance, promise funding and state the desire to become a “world leader”. From the 2017 industrial strategy of Theresa May’s premiership and Boris Johnson’s 2021 “plan for growth”, to current chancellor Jeremy Hunt’s long-term economic vision, numerous industries have been the subject of the Conservatives’ proclaimed world-beating goals: cryptocurrency, green energy and the future of transport to name a few.
As a result, British industrial policy has come to resemble a confused mix of pledges to rebuild UK manufacturing and take a lead role in the full array of industries of the future. Ambition is important: countries need a broad industrial base as well as depth. But such a haphazard approach risks leaving the UK without any real economic identity.
For one thing, a medium-sized economy such as the UK does not have the economic heft to compete on all fronts. The US, China and EU workforces, consumer markets, capital and global trade all dwarf Britain’s. Even if the country could find more public money to splurge on multiple sectors, it may be largely wasteful; businesses consider several factors beyond subsidies in deciding where to locate. And stretched finances mean a greater need for targeted support.
Second, trying to be good at everything is hard and invites scepticism — neither politics nor government departments have the required bandwidth to keep up momentum on all fronts. Having a distinct economic identity would instead send a clearer signal to investors and trade partners on how Britain fits into the global economy.
Britain would be better off in all senses by first working out what it wants to be good at. This does not mean having a centrally controlled industrial strategy. Downing Street has made clear, in any case, that Prime Minister Rishi Sunak is suspicious of such an approach. But it does mean thinking strategically.
The UK should first identify the industries where it needs a foothold for national, energy and supply chain security purposes. Beyond that, “the key thing is to consider where actual or latent comparative advantage lies”, says John Van Reenen at the Programme on Innovation and Diffusion at the London School of Economics. Nurturing these strengths — through improved access to skills and finance and less red tape — can help stimulate more trade and investment and build the revenue and expertise to then broaden Britain’s capabilities.
Hunt’s recognition of the need to enhance Britain’s fintech, advanced manufacturing, life sciences and creative industries expertise was a start. When it comes to green technologies, the country could focus on building up specialisms such as offshore wind, or carbon capture, usage and storage, where it has existing advantages — in part due to geography but also expertise in manufacturing components. Rather than trying to win the entire green transition, this could give the country a niche in the global clean tech supply chain. Growing Clean, a paper co-authored by Anna Valero at the LSE’s Centre for Economic Performance, highlights how regions beyond the South East are more proficient in these high-growth specialisms. Supporting them, she argues, can “contribute to growth that is more regionally balanced”.
Britain also has the advantage of being a genuine leader in sectors that support industrial development and climate transition globally. Its professional and financial services and research-intensive universities are world class. All industries need finance, legal support and R&D to thrive. The UK’s importance as a financial hub has made it a prime spot for developing green finance solutions around the world, and its researchers are a draw for international collaborations and funding. It is important that competitiveness in these strengths does not slide.
Focusing the scope of the UK’s world-leading ambitions is about taking pride in what Britain is good at and carving out its global role. Backing all growth sectors and industries is not the answer. A desire to be great at everything risks leaving the country great at nothing.
tej.parikh@ft.com
Source: Economy - ft.com
