The Delivery of an Industrial Strategy

Raising prosperity across England

Author: Jack Airey and Joe Fyans   |   25/03/2018

To date, the industrial strategy has largely been led by Whitehall. Announcements of green papers, white papers and sector deals have punctuated a shift in tone and approach towards the economy by central government. The state is no longer an automatic impediment to growth but a partner and enabler. Yet a national approach can only do so much. From such a high vantage it can be difficult to see the differences on the ground, the subtle shifts in employment or infrastructure which make a solution in one part of the country a wasted opportunity in another.

Now, places – namely, strategic authorities, local enterprise partnerships (LEPs), local business communities and other civic institutions such as universities – must take the industrial strategy forward in their area. This means local and strategic authorities using their existing legal capacity fully. It means the local public sector working with a unity of purpose in collaboration with Whitehall departments to lead on initiatives such as the industrial strategy’s Grand Challenges. And it means creative policy to release the brakes holding back living standards and economic growth.

Above all, the industrial strategy is an opportunity for reform and it is vital places seize it. This report is written to support places to do that, putting forward ideas for how strategic authorities and LEPs can lead and deliver the industrial strategy in their area.

The report includes a significant amount of data work on local economies (summarised in our industrial strategy data dashboard). The full data sheets and calculations for this analysis are available to download here.

It is also supported by exclusive polling done in collaboration with YouGov on people’s attitudes towards the economy. Full results are provided in the report’s appendix.

Key points

There is a risk the industrial strategy is place-led in name only. A central part of the industrial strategy is the agreement of local industrial strategies with places across England. This is welcome. It provides every part of England with the impetus to plan to make a success of Brexit and take advantage of impending changes to the economy, furthering pride in place and nation, all with the support of government. However, there is a danger that government’s ambition, and the potential of local industrial strategies, is not matched by its allocation of resource or attention. It would be a waste if, because so much energy is devoted to negotiating the country’s future relationship with the EU, one of the main reasons people vote for Brexit – that the economy does not work for them – is left unaddressed in the majority of places in England. Local industrial strategies are just one part of that of course, but an important part nonetheless. Government should aim to agree a local industrial strategy with every part of the country by the end of the Brexit transition period.

Underutilising strategic authorities could lead to gaping inequities in the efficacy of local industrial strategies. Many of the interventions that could make up a powerful and reforming local industrial strategy will not be legally possible without the strategic authority, nor will places be able to access devolved growth-related powers or funding flexibilities. In short, without marrying strategic decision-making with democratic accountability, there is a danger that local industrial strategies will be much weaker in non-metropolitan England. Divides in economic growth and opportunity across the country could end up being exacerbated – the opposite of what the industrial strategy was introduced for. To counter this – and the slowness of both government to agree, and some LEPs to begin planning, local industrial strategies – all strategic authorities should produce plans for the delivery of the local industrial strategy in their area.

The industrial strategy needs to focus on more than rates of productivity. The central premise of the industrial strategy – that working better, achieving higher rates of productivity, will lead to greater prosperity – is not believed by nearly two-thirds of the country. As public polling for this report finds, 61 percent of respondents do not believe they are appropriately rewarded for hard work. Moreover, as we detail in this report, the relationship between rates of productivity and prosperity is uncertain. In a number of places, rates of productivity have increased much more quickly than wages. Higher productivity is important, but not always a passport to individual prosperity.

Recommendations for local industrial strategies

Mark a departure from the Strategic Economic Plan (SEP) in ambit and evidence base. By virtue of the politics which drives them – the necessity to improve the economy and living standards across the country – local industrial strategies have a much wider remit than SEPs. While previous strategies from all tiers of government have often ignored whole swathes of the economy, population and country – tending to focus on high-wage, high-productivity sectors – local industrial strategies must begin to address the fundamental, day-to-day issues that entrench low wages, low skills and low rates of productivity. A large part of this will be achieved by local industrial strategies being grounded in a granular understanding of the local economy: the areas of genuine comparative advantage, the issues holding them back; and an honesty about the places where nothing but the economic equivalent of open heart surgery will suffice. In this regard, data collection and business engagement are vital to the development of the local industrial strategy.

Achieve a more productive relationship with government. Industrial strategy has subsumed the devolution agenda. Because the capacity of Number 10 and HM Treasury to negotiate deals around set-piece political events – e.g. the Budget and Autumn Statement – is significantly reduced, it is now the prism through which shared agendas can be identified and ultimately achieved. This, in time, should open up access to funding flexibilities and devolved powers to places which failed to agree devolution deals.

Aim to use the local public sector’s existing legal and legislative capacity more fully. Devolved powers and funding flexibilities are an important route to places being able to design and deliver interventions that support their local economy and improve living standards. However the truth is that, in places across the country, there remains significant headroom in the use of powers and freedoms to drive local prosperity. Policy capacity in economic, social and growth issues is often overlooked and under-leveraged. Local industrial strategies should be a catalyst for places to use their legislative means more fully. It is largely in the hands of places to do this. However, government can enable places to lead by putting greater emphasis on the role of strategic authorities to promote economic development. It can do this by providing strategic authority members and officers with greater confidence by introducing a General Power of Economic Competence.

Develop a local labour market strategy that provides lifelong support for people to be economically active and appropriately skilled. Driven by the analysis and advice of newly-formed Skills Advisory Panels (SAPs), and working with local businesses and skills providers to implement government’s strategies for careers guidance and post-16 skills, strategies should shape pathways of education – for the young and old – to equip people with the skills a local economy demands today and in the future. They should support inactive or likely-to-exit groups into, or to remain in, the local labour market. And they should have a more active presence in matching labour to jobs where the market fails to. As part of this, every worker should expect local industrial strategies to have foresight of and considered actions to mitigate technical and political changes in the economy and labour market, for instance the impacts of automation or Brexit.

Develop a good jobs strategy that stimulates demand for jobs that are more secure and better-paid. Part of this should include measures to encourage businesses to take more risks on initiatives that generate more and better work – e.g. providing certainty on issues such as commercial land provision, tax breaks, seed funding to fledgling businesses and a reorientation of public sector spend, where possible, towards local companies. It should also include strengthening the contract between place, employer and worker. This should mean introducing measures that nudge local businesses, where they don’t already, to pay and invest in their workers more – e.g. a local employment charter determining advisory, non-statutory standards on ‘good work’. Develop a commercial commons strategy that aims to make places more attractive to people and investment. If local industrial strategies are to improve the prospects of failing places, a focus on addressing their physical and perceptual constraints to growth must be an important fixture. This includes the connectivity, beauty and safety of town and city centres, and also the regulation that enhances or detracts from those qualities.

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