ICAEW is supporting the British government’s Industrial Strategy, but accountants could do more to help promote the regeneration agenda, says Lesley Meall.
When the UK government published the white paper Industrial Strategy: Building a Britain Fit for the Future towards the end of 2017, business groups gave it a relatively positive welcome. Adam Marshall, head of the British Chambers of Commerce, said that firms’ concerns had been “listened to”; Terry Scuoler, chief executive of the manufacturers’ organisation EEF, described the strategy as “a good foundation for a new partnership” between industry and government; and the CBI advised the government to move fast from strategy to action.
ICAEW also welcomed the Industrial Strategy and is working hard to support its aims. “We are collaborating closely with government and many business organisations to ensure the success of the Industrial Strategy, which is intended to boost research and development, economic productivity and investment, particularly in the context of Brexit,” says CEO Michael Izza. As well as developing innovative high-growth businesses and exploiting emerging technologies, the strategy aims to grow R&D investment in the UK to 2.4% of GDP within nine years, and 3% longer term.
Policies and proposals in some government white papers can sink without trace; some exert influence so indefinitely that it is impossible to be certain they have had any; but over the past year, some high-level plans in the Industrial Strategy white paper have materialised. There are business success stories, such as solar power company Ronovagen and a partnership between battery specialist ICoNiChem Ltd and Warwick Manufacturing Group, part of the University of Warwick, which became Industrial Strategy Challenge Fund winners.
“The Industrial Strategy is a new way of working for government, working across departments to build long-term partnerships with business, academia, and local leaders,” says Greg Clark MP, secretary of state for business, energy and industrial strategy. Clark claims “important achievements” across the five interconnected foundations of the strategy on which government is building its pursuit of higher investment and productivity, citing “record levels of public investment in R&D, matched by sustained growth in private sector spending” as examples.
There has also been progress on other important elements of the strategy, such as Sector Deals and the collaboration that they demand. Government and the life sciences sector, for example, have agreed a multi-billion pound deal that involves investment from private and charitable sectors and significant R&D commitments from government. Agreement has also been reached on Sector Deals involving government and other sectors including artificial intelligence (AI) and the creative industries; ICAEW is collaborating on proposals for an imminent Sector Deal for professional and business services.
Support and development
“We are supporting the industrial strategy in a big way,” says Shaun Beaney, a manager in ICAEW’s Corporate Finance Faculty, working in partnership with government-funded organisations such as UK Research and Innovation throught its Innovate UK arm. In July 2018, ICAEW hosted a conference, Boosting Finance for the UK’s Industrial Strategy, at Chartered Accountants’ Hall, to encourage more private sector investment to come in behind the Industrial Strategy, by bringing together policymakers, government agencies, technologists, companies, investors and advisers. “ICAEW welcomes the significant additional investment by the government to encourage private sector investment because it’s very important for innovation and R&D in the UK,” says Beaney.
ICAEW is not, however, uncritical in its support. “There are a number of ways in which the Industrial Strategy could be made even better,” says Beaney. Examples include: communicating the strategy to business; additional investment; greater priority for some sectors; and aligning the strategy with British Patient Capital, part of the state-owned British Business Bank. Under the umbrella of the Industrial Strategy there are hundreds of different funding and business support programmes.
“We think that government could have been better at communicating the opportunities and benefits to business. That’s why ICAEW held the conference. That’s why it is developing institute-wide initiatives, involving all of its departments and institute experts across the regions, to support the Industrial Strategy,” says Beaney.
Although the Industrial Strategy commits to several billion pounds in funding, this may prove insufficient for its aims. “Significant rounds of further investment will be needed to help the UK’s competitiveness and productivity, as these billions are dwarfed by things being done in other economies, such as China, Germany, the US and Japan,” says Beaney. SoftBank Vision, a private equity fund (which is backed by Japan’s SoftBank Group and Public Investment Fund, Saudi Arabia’s main sovereign wealth fund) has a $93bn fund for investments in technology sectors such as AI and robotics.
In a 2018 report on AI and jobs, PwC said the government should invest more in ‘STEAM’ skills that will be most useful to people in this increasingly automated world. This means focusing more on STEM subjects (science, technology, engineering and mathematics), but also exploring how art and design (the ‘A’ in ‘STEAM’) can feature at the heart of innovation.
The Industrial Strategy will need the flexibility to address opportunities, such as emerging technologies, and rise to challenges such as the aging population. “Some sectors could be prioritised a little more than others,” says Beaney, describing funding allocations to energy as “relatively low”, given the scale of the challenges the UK faces.
There may also be good reasons to focus more on sectors such as transport infrastructure and housing, and address potential existential threats, such as biotech in the short term and climate change longer term. During the consultation on the Industrial Strategy (which was run by the Department for Business, Energy and Industrial Strategy), ICAEW spotted another way to improve its effectiveness, by aligning it with British Patient Capital, which was the subject of a parallel but separate review (run by HM Treasury).
An additional £2.5bn of investment in high growth and innovative companies is now being managed by British Patient Capital. Beaney says: “Over time, we hope that some of that later stage patient capital funding will make its way to the sort of innovative, high growth companies that are the focus of the Industrial Strategy’s four Grand Challenges.” In the spirit of collaboration, constructive criticism can be a two-way street.
Dr Ian Campbell, interim executive chair at Innovate UK, has some words of wisdom on how the profession can better support the Industrial Strategy. “We need more accountants who know about the SME tax credit scheme, how to account for R&D and how to scale, grow and float businesses,” he says. “New models of supporting business and different innovative forms of finance need a new set of entrepreneurial accountants. Government can only do so much.”
The Industrial Strategy
The aim of the Industrial Strategy is to boost productivity by backing businesses to create good jobs and increase the earning power of people throughout the UK with investment in skills, industries and infrastructure. The strategy builds on five ‘foundations’: ideas, people, infrastructure, business environment, and places.
The strategy also identifies what it terms as Grand Challenges to put the UK at the forefront of the industries of the future and improve productivity. The first four are focused on global trends that will transform the future: artificial intelligence (AI) and data; ageing society; clean growth; and future of mobility.
To support the Industrial Strategy, a number of sector deals are in place. Each deal is a package of different investment programmes and business programmes, which can include programmes for education, skills development, regional initiatives, some direct investment and other ways to support business.
Partnerships are now in place between government and industry for aerospace, AI, automotive, construction, creative industries, life sciences, nuclear and rail. Others are in the pipeline for sectors including food and drink manufacturing, professional and business services, and UK tourism.
Originally published in Economia, April 2019.