Government’s Industrial Strategy builds on Britain’s strengths, but risks ignoring what this must mean for left-behind places 9 December 2024 The Government’s Industrial Strategy Green Paper has a welcome focus on leveraging Britain’s economic strengths – as an exporter of services, a European leader for defence, and a strong university-led research base – and identifies a sensible set of clusters and growth industries. But to focus on these, the strategy will need to pass over other sectors, and the Government must acknowledge the trade-offs this involves for areas that lack economic firepower, the Resolution Foundation said today (Monday). While the Industrial Strategy Green Paper slipped under the radar when it was published alongside the Autumn Budget, the Foundation’s new report The Art of Strategy, argues that the Green Paper offers a helpful but high-level clarification of the Government’s emerging economic strategy. It welcomes the Green Paper’s clarity about Britain’s economic strengths and its place in the world – a mid-sized open economy that relies heavily on international trade and partnerships to drive economic growth. The Green Paper is also refreshingly honest, say the authors, about Britain’s economic weaknesses, including weak labour productivity, low investment, falling business dynamism and uneven levels of workforce skills. Addressing these challenges will be necessary to build on Britain’s strengths and boost economic growth. In its Green Paper, the Government identifies eight high-growth-potential sectors – advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services – that should be supported by domestic policy. This is a sensible list to focus on, say the authors. However, they caution that there remain major gaps in the Government’s strategy to be filled. The report notes that the eight ‘growth-driving sectors’ identified in the Industrial Strategy are more prominent in richer parts of the UK. Household incomes are nearly twice as high in the three sub-regions (Berkshire, Buckinghamshire and Oxfordshire; Inner London East; and Inner London West) with the highest share of growth sectors than in the three sub-regions (East Yorkshire and Northern Lincolnshire; Cornwall and Isles of Scilly; and Lincolnshire) with the lowest shares. The Foundation says the strategy should promote investment in successful areas like the ‘golden triangle’ of Cambridge, Oxford and London, while growth in strategic sectors like renewables and carbon capture is likely to take place outside the Southeast . But rather than just turbo-charging existing areas of economic success, the report calls on the Government to use its Industrial Strategy to encourage low-prosperity but high-potential areas to buy in to Britain’s economic strengths. In particular, the authors highlight the potential of city regions like Manchester and Birmingham, which are large enough to enjoy agglomeration benefits in high value services sectors like business and creative services, but currently have productivity below the UK average. It adds that City Mayors should play a central role in encouraging a better geographic spread of economic growth and should be empowered to do so – another gap in the Green Paper that needs to be filled. Greg Thwaites, Research Director at the Resolution Foundation, said: “The Government’s recent Industrial Strategy slipped under the radar while attention was focused on the Autumn Budget. But it represents the clearest indicator yet of the Government’s emerging economic strategy, and where it hopes to secure stronger growth. “The strategy is rightly focused on what Britain is good at, and refreshingly honest about where we need to improve. “But if the Government wants to deliver on its new economic milestone of raising living standards in every part of the UK, it needs to be up front that its Industrial Strategy won’t reach some parts of the country.”
