Industrial Strategy: A positive start but more must be done
Post by Stephen Ibbotson, Director, Commercial and Business, ICAEW, for ResPublica's Disraili Room blog, 26 January 2017.
The Government recently revealed their industrial strategy, with three main aims:
- Build on our strengths and extend excellence into the future;
- Close the gap between the UK’s most productive companies, industries, places and people and the rest; and
- Make the UK one of the most competitive places in the world to start or grow a business.
What followed were ten pillars of the industrial strategy, which aim to nudge the UK economy in the direction needed to reach these goals. The Green Paper is comprehensive and the Government has done well to select 10 areas which need attention. It is also undoubtedly a positive that the Government is thinking strategically and in the long-term interests of UK plc.
However, to make the industrial strategy a success it needs a Government that is accountable to the results on the ground and on this it is a golden opportunity missed. It needs to right metrics to measure productivity. The UK is, on average, 18% behind other G7 countries. As Chartered Accountants, we know that what gets measured gets done. So first among our recommendations is the adoption of a National Productivity target. It has worked for Singapore, propelling them to the highest income nation in Asia, and alongside other measures it can work for the UK in a post-Brexit environment. A productivity target is one of our three recommendations to Government to help engage businesses in the industrial strategy:
- National Productivity target: Adopt a national productivity target of 2-3% growth to transform the government’s industrial strategy into a clear plan of action. This will give everyone a clear direction of travel. This should be accompanied by a serious discussion on the nature of the modern economy and how we measure productivity.
- Supporting SMEs: Government needs to address the growing regulatory burden on small businesses. Costs from Making Tax Digital, increases to business rates, minimum wage rises and the apprenticeships levy all occurring within a short time frame is taking away from a business’s ability to reinvest. By focussing on sector deals there is also a risk that large business dominate discussion and government time and the benefits are not widespread.
- Exports and trade: Introduce an export voucher to help businesses deal with the costs of exporting. It is encouraging the Government has made exporting one of the ten pillars, but more could be done to incentivise businesses. Recent ICAEW found that only 53% of businesses are exporting, and of those not exporting, 96% have no plans to do so in the future. More ambition might be needed from Government to make a noticeable different in those disappointing figures.
The Government has made a positive start but more needs to be done. It must make itself accountable for the industrial strategy and ensure that the results are widely spread. It needs to engage businesses up and down the country, not just those who shout the loudest or already have the deepest pockets. We look forward to working with Government to achieve those aims.
ICAEW submitted to the Business, Energy and Industrial strategy select committee inquiry on industrial strategy with our Director of Business Stephen Ibbotson giving evidence to the committee in December. We will be responding to the Government consultation in due course.