What is a Local Industrial Strategy?

With the Industrial Strategy White Paper expected imminently, I recently took part in a seminar hosted by the Sheffield Institute for Policy Studies, which considered the role of Local Industrial Strategies.

A particular focus was Sheffield City Region’s emerging Inclusive Industrial Strategy, a replacement for the Strategic Economic Plan, which has been developed over the past six months and is due to be consulted on shortly.

One topic of debate was exactly what is meant by the term ‘industry’.  The ten pillars set out in the Government’s Green Paper are so broad-ranging that interventions would benefit the whole economy, not only those elements which might be thought of as ‘industrial’.  Indeed the Green Paper sets out the Government’s ambition to “increase productivity and drive growth across the whole country”.

But elsewhere there is specific mention of a number of high tech industries and an intention to develop world-leading sectors through sector deals, a number of which are already being negotiated.  As Professor Steve Fothergill pointed out, the only new money associated with the Industrial Strategy to date - the £1bn Industrial Strategy Challenge Fund - is targeted at just six sectors: healthcare & medicine, robotics & artificial intelligence, batteries, self-driving vehicles, materials for the future and satellites & space technology[1].

As important as these no doubt are to the UK’s global competitiveness, they account for only a very small proportion of the economy as a whole, and are highly spatially concentrated in certain parts of the country - mainly the bits which are already economically strong.  Whatever benefits the ISCF creates, it is unlikely to make much of a contribution to the Government’s stated aim of ensuring that “all parts of the country must be firing on all cylinders”.

A Changing Focus?

Which brings us to the issue of inclusion, another topic that was discussed at the seminar.  Inclusive growth has been a great focus of attention recently, with growing awareness of the economic and social costs that arise when people or places do not benefit from economic growth.  But should inclusion be a priority for an industrial strategy?

  • The first report of the Industrial Strategy Commission said that the focus of an industrial strategy “is distinct from an inclusive growth agenda, and long-term innovation and productive growth should stay the focus of strategic choices”

  • But the Commission’s final report[2] notes that, whilst an “industrial strategy should not try to do everything everywhere…it should seek to do something for everywhere” and acknowledges that “when there is a trade-off between economic efficiency and the equitable treatment of communities, sometimes it is right for the fairness objective to predominate.”

What does this mean at local level?  Areas which make the case to Government nationally for economic development funding based on the equity principle – arguing that funding shouldn’t only go to those parts of the country where it will generate the greatest economic return – need to consider the implications locally: will their local industrial strategies prioritise only those sectors or opportunities which will create the greatest impact locally?  What does that mean for their ‘left behind’ communities?

One solution to addressing this trade-off is to ensure that those parts of the economy that provide local employment are given due prominence in strategies both locally and nationally – health and social care, retail and leisure, business services etc.  These sectors may not be high value, they may not be major export earners, but they do account for a large proportion of local employment and GVA across many parts of the country.  Small improvements in productivity in these and other less glamorous sectors have the potential to have a significant impact on economic output, local employment and well-being.

If you’re thinking about what the Industrial Strategy means for your local area, or considering how to encourage higher levels of employment and GVA, please get in touch at Cassie.houlden@ekosgen.co.uk or 0845 644 5407

 

[1] https://www4.shu.ac.uk/research/cresr/sites/shu.ac.uk/files/cresr30th-industrial-strategy-regions.pdf

[2] http://industrialstrategycommission.org.uk/2017/11/01/the-final-report-of-the-industrial-strategy-commission/