Fred Perry describes how business, the regions and even other countries were involved in shaping a key government policy
Since the turn of the 21st century, UK governments have launched over a dozen industrial strategies, growth plans or similar initiatives. Efforts have spanned political parties – Peter Mandelson, Vince Cable, and Greg Clark all published an industrial strategy, each distinctive but rooted in similar themes around innovation, technological advancements and the industries of the future. Last summer, we were asked to brief the (then) newly appointed Business Secretary on what a modern industrial strategy could look like under a Labour government. The question for us was: what would we do differently?
All industrial and growth strategies are shaped by, and in turn shape, the economic context of their time. As we appraised the landscape afresh, our analysis highlighted an overall lack of market dynamism domestically and uncertainty in the trading environment globally. Yet the data also suggested that certain sectors were having an outsized impact on growth and were well positioned to continue growing into the 2030s. Using economic modeling we went on to identify eight growth-driving sectors – the ‘IS-8’ – based on their contribution primarily to growth but also to regional growth, economic security and net zero. The IS-8 included financial and professional services and digital and technologies, reflecting a ‘modern’ industrial strategy, going beyond traditional 20th century assumptions of advanced manufacturing, that would represent the full range of the UK’s economic strengths.
The next step of our process was to develop policies on the principle that we could ‘tilt’ expenditure and supply-side measures towards the IS-8 and the priority ‘places’ in which they are clustered. We weren’t attempting to aggregate existing policy, we were actively shaping it to support IS-8 needs. In doing so, we embraced a wide range of measures – not just traditional levers like skills, finance, and R&D, but also data, tax, procurement and public-private governance. Instrumental to that effort was extensive partnership working – between government departments and wider public bodies, with business, across regions and devolved nations, and with international partners.
Figure 1
Starting off on the right foot
From the outset, the strategy was conceived as a joint endeavour. In contrast to previous efforts which were often projects of the business department (or its earlier equivalents), we set up the project from the Department for Business and Trade and His Majesty’s Treasury, with a great number of secondments from other departments into the central Industrial Strategy Unit. The two departments co-led a process that encompassed evidence gathering, policy design, and implementation. Crucially, this involved not just the ‘economic departments’, as has tended to happen in the past, but almost every part of government – from engaging all nations with the Scotland, Wales and Northern Ireland Offices, to working with the Ministry of Justice on the legal services sector. All told, we reckon 21 of the 24 ministerial departments were meaningfully involved in the process to identify policy contributions. Having the Treasury alongside us as a co-partner meant that this was effectively co-ordinated through the structures they had set up for the growth mission.
We were determined throughout that the evidence on which we built the strategy would as far as possible come directly from business. At the International Investor Summit in October last year we published a green paper, ‘Invest 2035’, and launched a six-week consultation that drew several thousand responses and 27,000 quantitative and qualitative data points, many of which represented pages-worth of considered evidence. While initially overwhelming, we created an AI-driven Large Language Model to grapple with the ensuing dataset, an exercise corroborated by scrutiny of the dataset by analysts. Deploying AI allowed us to extract themes more quickly, generate visualisations, and focus efforts on identifying barriers to growth and sector-specific priorities, along with policy ideas to overcome them. We decided to send a short summary of these findings as part of a ‘thank you’ to the thousands of respondents, a small touch that was clearly appreciated judging by the many who told us this was the first time their submission to a policy consultation had been acknowledged.
Beyond evidence gathering in this way, we wanted to maintain a business lens. We therefore established an Industrial Strategy Advisory Council – comprised of business leaders, economists and union representatives – to act as an independent, expert body able to advise on the strategic direction of industrial policy and delivery. One example of where this body made a difference was on energy, where its advocacy advanced the (ultimately successful) case for a price relief intervention for energy-intensive industries – the British Industrial Competitiveness Scheme – as well as a continuing focus on energy market reform.
Sector-specific taskforces – some newly created, some longstanding – also helped shape our plans, and we created an Industrial Strategy Forum to bring together business representative organisations, who had a powerful multiplier effect on behalf of their members. Across the whole of government, we estimated (conservatively) that the Industrial Strategy Unit co-ordinated over 1,100 points of engagement – many with multiple stakeholders – over the course of the year-long policy development process. These influenced a wide range of issues, from the nuance of our skills packages through to the different level of emphasis we needed to place on economic security across the IS-8.
As we neared publication, we were again mindful of our private sector audience. Some industrial strategy documents in the past have been quite academic in style, so we tried to shift the structure and tone to be more accessible to the businesses the publication was intended to support. A good example of this was our attempt to simplify the range of public finance institutions and interventions into a single diagram that showed how firms could access finance to scale-up (see Figure 2).
While our primary audience was business, we equally wanted to communicate the depth of our economic analysis to policymakers and academia. Analysis and policy development had been integrated from the start and had underpinned the creation of the detailed methodologies we had used to identify the IS-8 and create the overall Industrial Strategy framework. We committed this work to a ‘Technical Annex’ which, while technocratic in name, was rich in international comparisons and evidence on industrial competitiveness, and provided a transparent explanation of how we had made choices.
Figure 2
For some civil servants, writing in a more informal tone represented a new challenge, given that government is usually more comfortable speaking with a policy voice and drafting through difficult inter-department negotiations. Even then, the final document was long so we produced two-page summaries for dissemination across various market networks, plus factsheets tailored to different regions. The effort was worth it, with online engagement rates often exceeding traditional benchmarks by four times and widespread media pick-up in over 20 global markets.
Broadening partnerships regionally
We were equally keen that our partnership approach should acknowledge that business sectors often cluster in local economies, many with huge growth potential to address regional inequalities. This also introduced a wider set of policy considerations such as transport, planning and infrastructure. While regional growth had been foundational to previous industrial strategies, these had been devised before the establishment of Mayoral Strategic Authorities (MSAs) across the economies of England’s major city-regions. Working with MSAs for the first time allowed us to develop new partnerships with local leaders, shaping our policy programme to create a strategy grounded in the distinct regional opportunities and challenges – from Local Innovation Partnerships Funds for places with high R&D potential, through to a Strategic Sites Accelerator to develop brownfield sites in areas with manufacturing strengths. Indeed, these dialogues have continued as we respond to forthcoming MSA Local Growth Plans, which are critical to the delivery of more business investment across the country.
While the creation of MSAs has presented us with a new opportunity, navigating this new administrative architecture was not without its difficulties. There is significant variation in the capability, capacity and local economies of MSAs, as well as gaps in geographic coverage across England. We therefore corroborated MSA engagement with our own detailed regional analysis of where we had confidence that high-potential sectoral clusters exist.
There are no exact MSA equivalents in Scotland, Wales or Northern Ireland. In these countries we built partnerships with each of the national governments, reaping a small dividend from meeting early and often. With all three nations due to have elections in the next year, we have had to navigate political and fiscal decision-making processes that were not always perfectly aligned. However, the final strategy contains clear joint commitments across the whole of the UK and has been broadly welcomed across the devolved governments.
Figure 3
The international dimension
While all departmental configurations have their pros and cons, one of the great benefits of operating from a department for both business and trade is that we are much closer to the action of international trade policy. After all, the IS-8 had been selected not just for their above-average growth prospects but because these sectors had ‘revealed comparative advantage’ relative to competitors overseas. For a mid-sized country like the UK, the only way to sustained economic growth is trade – to create scale far beyond what we can consume domestically.
However, to capitalise on this, business needs access to global markets that is as frictionless as possible. Working across the corridor from our trade colleagues meant that we could not only co-design the parallel Trade Strategy, but work closely with colleagues driving significant international partnerships such as the UK-US Economic Prosperity Deal, which had a huge bearing on the tariff regime that would affect the IS-8. This joint-working led to the creation of ‘Industrial Strategy Partnerships’, aimed at deepening collaboration between the UK and its partner nations based on complementary strengths in frontier industries, with agreements now secured with Japan, Saudi Arabia and France. The French deal was announced as part of the UK-France Summit in July, focusing on industries such as AI, critical minerals and carbon capture.
Looking back and ahead
Reflecting on the work of the last 15 months, the partnership approach to industrial strategy and other new ways of working contain five lessons for policymakers.
1. Learn from the past – We benefited hugely from the domain knowledge of a set of analysts and economic policymakers who, despite several changes to the machinery of government, had remained a relatively stable team for over a decade. This group not only had a sense of how previous industrial and growth strategies had fared over recent decades, but many of them had been actively involved across one or more of them. Their institutional knowledge was invaluable as we set out a new framework.
2. Co-design builds better policy – Thanks to qualitative evidence gathering and sustained engagement with business, we had much better sector expertise and better insights into which barriers matter. Such dialogue built trust and ultimately buy-in from the private sector which will be vital as we embark on the implementation phase.
3. Data-driven decision making – By using evidence and taking a data-driven approach, we achieved better results. From using novel data to understand the AI sector through to AI-driven models, we were able to get far more out of the data we collected, as well as much speedier results. The analytics team within the business department – many of whom had joined from outside government – was an indispensable asset.
4. Going global – The understanding we gleaned from looking at other countries’ policies meant we had a keen sense of where and how to compete, while the international partnerships have been a great investment for the long term.
5. Capability building – The institutional knowledge we had already inherited on industrial policy was invaluable. In setting up an Industrial Strategy Unit and an Industrial Strategy Advisory Council (with a commitment to put it on a statutory footing) we have gone a step further to ensure that industrial policy will be more innovative in the years ahead. In the nearer term it means we will be able to deliver the spirit, as well as the word, of Industrial Strategy over this parliament.
While we have turned our focus to delivery, these five lessons reflect a genuine effort to develop this Industrial Strategy in partnership with stakeholders, as well as potentially providing a useful blueprint for how policymakers and civil servants can work effectively with business to shape strategies.
