UK government unveils new Industrial Strategy: tackling the four "Grand Challenges"

The government’s long-awaited Industrial Strategy White Paper was published on 27 November 2017.  The paper focuses on how to boost the productivity and earning power of the UK, with a strong focus on innovation and future technologies.  It takes the same approach as the Chancellor’s Budget speech of 22 November, seeking to look beyond Brexit to laying the foundations for a globally successful, innovative, digitised and highly skilled future for the UK.

Boosting productivity and “Sector Deals”

The White Paper highlights British successes, but also argues that the UK has not fully exploited its export potential, has underinvested and has not supported development of key skills needed for the future.  The paper perceives economic performance as weak in many locations outside London, and overall productivity has lagged behind the UK’s global competitors, in part because of the “long tail” of underperformance which trails far behind the productivity levels of some of the UK’s leading businesses.  The government sees its role as being not just to ensure the free operation of market forces to boost productivity through competition, but also – in what could be argued to be a philosophical shift for a Conservative government – to harness the power of government to make major long-term investments and to shoulder risk, to boost sectors through partnerships between industry, workers, academia and all levels of government.

The White Paper announces four “Sector Deals” (mainly building on existing initiatives) in relation to: life sciences, the construction sector, artificial intelligence, and the automotive sector, with more to follow in the new year.

Four “Grand Challenges”

The White Paper lays down four “Grand Challenges”:

• AI & data economy: the government wants the UK to be in the vanguard of the AI and data revolution, and sets itself priorities:
  • to ensure the UK remains a global centre for AI and data-driven innovation, with funding for academia and support for regulators working with innovators to understand how regulation applies to new technologies;
  • to promote the deployment of AI and data technologies by businesses to boost productivity, with a focus on the cybersecurity, life sciences, construction, manufacturing, energy and agricultural technology sectors. There will be export support as the global AI market grows, and measures to encourage AI and data businesses to have their HQs in the UK;
  • to lead the world in safe and ethical use of AI; and
  • to help people develop skills for the future. The government will support the development of skills to support digitalisation and computer science, as well as training for people to re-skill and up-skill in response to the disruption caused by automation.
• Clean growth: the second “Grand Challenge” is to promote both the development and commercial deployment of low carbon and clean technologies, with the following priorities:
  • to develop smart systems for cheap and clean technologies across power, heating and transport, including remodelling the national grid;
  • to improve dramatically the efficiency of construction techniques. There will be a drive to deploy technologies for safer, healthier, more affordable and more energy-efficient homes;
  • to make energy intensive industries competitive in the clean economy through investment in industrial energy efficiency;
  • to develop high-efficiency agriculture, increasing the incentives for sustainable agriculture and promoting agriculture which produces more from less; and
  • to promote the UK as a leader for green finance, and to develop green financial management standards.
• Future of mobility: the third “Grand Challenge” is to make the UK a world leader in developing transport and logistics. Again, priorities are set:
  • to establish a flexible regulatory framework to support the emergence of new technologies, including an ambition to see driverless cars on UK roads by 2021;
  • to support and promote the transition from current motor technologies to zero-emission vehicles;
  • to prioritise preparation for future models of mobility, including adaptations to road building; and
  • to continue to invest in developing the infrastructure for connected and autonomous vehicles.
• Aging society: the final “Grand Challenge” is to adapt the UK for a population which will live longer, to ensure older people can continue to live independent, fulfilling lives and contribute to society. Priorities will be:
  • to support the development of innovative new products for older people, to benefit both the older consumers and the businesses supplying them;
  • to support industry as it incorporates older people into the workforce;
  • to invest in harnessing the NHS’s data resources in a fair and secure way, to optimise earlier diagnosis and better treatment of illness; and
  • to support the social care sector.

Five “foundations”

The White Paper describes the five foundations on which responses to the Grand Challenges will be built.

• Ideas: the government wants the UK to be the world’s most innovative economy. It plans to invest more in research, ensuring that the UK remains a global leader.  Moreover, it will seek to ensure that commercial development of UK research is optimised, and that the growth from R&D does not end up being generated elsewhere.
• People: the UK’s Industrial Strategy aims to generate “good jobs” and greater earning power. This is to be achieved by improvements in the quality and reputation of technical education, increasing the number of people studying the STEM subjects (science, technology, engineering and maths) and digital skills, and reducing regional and social disparities in education and skills.
• Infrastructure: the White Paper announces “a major upgrade to the UK’s infrastructure”, to ensure that it supports long-term productivity. It envisages a surge of investment to transform economic geography of the UK, ready for a new technological era.  This will include investment in transport, housing and digital infrastructure, including 5G networks.
• Business environment: the government wants to ensure that the UK is the best place to start and grow a business. The White Paper emphasises that the best approach is not to “pick favourites” for subsidy and support, but to promote a highly competitive and vigorous economy where even the largest businesses are challenged by innovation.  Sector Deals, discussed above, will be a key element of this foundation.
• Places: one of the possible interpretations of the Brexit result was as an expression of dissatisfaction with the unequal distribution of wealth across the UK. The White Paper acknowledges regional disparities across the UK and the government’s desire to support growth across the UK economy, through local input into development of the right policies for each area.

Osborne Clarke comment

There is a huge amount of detail in the Industrial Strategy White Paper.  The Green Paper which preceded it in January 2017 was criticised in some quarters for offering insufficiently concrete proposals.  That issue has to some extent been addressed in this White Paper.  Much of the funding content repeats commitments previously made (in particular, in last week’s Budget) but there is also a long list of future initiatives and proposals which will follow on from this paper in the coming weeks and months.

This includes consulting on:

• the remit of the new Centre for Data Ethics and Innovation;
• the government’s role in supporting development of new mobility services;
• the new “T Levels” (technical qualifications);
• a new package of measures to support industrial energy productivity and efficiency;
• the detailed implementation of Entrepreneur’s Relief; and
• the design and priorities for the new UK Shared Prosperity Fund (for regional development).

The government will also:

• seek Law Commission proposals for a long-term regulatory framework for self-driving vehicles;
• publish a strategy on government support for the transition to zero-emission road transport;
• review the telecoms market to understand businesses’ incentives for investment in new digital infrastructure;
• review how to improve the productivity of SMEs;
• issue a Green Paper with proposals for long-term sustainable reform of social care and support; and
• launch a call for proposals to establish the first Institute of Technology.

A point of particular interest is the Sector Deals initiatives.  Partnerships between government, industry and academia have had notable success in boosting the UK automotive and aerospace sectors and there is clearly a desire from all sides to expand that model of co-operation and mutual support into new areas.  For those industries not already involved in a Sector Deal, it is worth noting the guidance included in the White Paper on how to develop a proposal for a new Sector Deal – the list is certainly not closed.