In 2023 the Institute for Public Policy Research (IPPR) noted that: “From the UK’s ‘Plan for Growth’ in 2011 to Jeremy Hunt’s ‘Growth Plan’ ……. there have been a total of 11 different economic strategies or ’plans for growth’ over the last 13 years”. What’s more, they have all stirred the same ashes over and over again: Britain has routinely ranked in the bottom 10% of OECD countries for overall investment intensity, has experienced a slowdown in productivity growth over the last decade, is one of the most unequal of the industrialised economies, has wide geographical disparities, and fails to translate invention into commodity production. Average real wages were only 0.5% higher in July 2024 than they were just before the global financial crisis in December 2007.
December’s Trades Council meeting heard that the new Labour government has been quick out of the stalls in publishing its own, new “Industrial Strategy” – “Invest 2035”.
As the Centre for Cities has noted, this latest Strategy does not differ greatly from that put out by the Theresa May in 2017: “The 2017 version created sector deals for 10 sectors (AI, Aerospace, Automotive, Construction, Creative Industries, Life Sciences, Nuclear, Offshore Wind, Rail and Tourism) while the 2024 Green Paper identifies eight ‘growth-driving’ sectors (Advanced Manufacturing, Clean Energy Industries, Creative Industries, Defence, Digital and Technologies, Financial Services, Life Sciences, and Professional and Business Services)”.
Invest 2035 says that for each of the sectors identified there will be “an ambitious sector plan…..designed in partnership with business, devolved governments, regions and other stakeholders, through bespoke arrangements tailored to each sector”. But we will have to wait and see how granular these plans will be, and whether, for instance, they will go so far as to encompass the sort of “just transition” guarantees we have discussed in relation to the “net zero” objective.
The document seems to shy away from seeing public investment as anything other than a sort of “pump-priming” process: “The government also uses grant funding and other financial instruments to unlock investment, including examples of grant programmes for specific sectors and Innovate UK’s portfolio of grants, contracts and investments used to leverage private capital in innovative firms with ground-breaking technology. In line with recommendations from the National Wealth Fund Taskforce, the government is creating the National Wealth Fund which will unlock billions of pounds in private investment, supporting the industrial strategy”. The idea, in other words, is that the birds will nest if you make the garden attractive – which is fair enough, so far as it goes. The big question is, however, whether it goes, or will go, far enough.
In the context of the sector plans, for example, it is reasonable to ask if these will identify specific investments to drive forward national or regional developments and, if so, who would be responsible for delivering these? It can be difficult to follow the detail from afar. Take Hydrogen projects. The government has carried over the Hydrogen Strategy of the previous government, which had “the ambition of 1 GW CCUS-enabled and up to 1 GW electrolytic hydrogen capacity in construction or operation by 2025”. Delivering the 2024 Autumn budget Chancellor Rachel Reeves confirmed £2 billion in funding for 11 electrolytic hydrogen production projects (the first hydrogen allocation round (HAR1)) across the country. These 11 projects total 125MW in capacity. HAR2, which could support up to a further 875MW of low carbon hydrogen is only now open for applications. So the ambition timetable seems to be slipping. Would that have been the case if the government took a more “interventionist” role, by directly investing in developments? As we have observed before, was “Britishvolt” an example of how more involvement in and control over developments is required?
The question of scale is not examined, and so this remains the elephant in the room. It can be difficult to compare government support for industry between countries because of a lack of reliable and comparable data, because of the variety of ways in which companies can be supported – grants, tax-breaks, shares taken in company – and the differing points at which interventions can be made – start-up, expansion, point of failure. Our belief, however, is that Britain is not a leader in this area in terms of scale. See, for instance, this (admittedly somewhat old) Table from Buigues, Pierre & Sekkat, Khalid. (2010). “Public Subsidies to Business: An International Comparison” (Journal of Industry, Competition and Trade. 11):
At the end of the day, it seems odd that the strategy does not include any attempt to estimate quantitatively what might be required.
Invest 2035 talks about “renewing commitment to free and fair trade”, which may turn out to be somewhat out of the British government’s hands. It does seem also to mean that – like its predecessors – it does not incorporate the point that some strategic decisions may be necessary that confront, or set limits to, “market” solutions. It says: “The government is committed to using the power of the state strategically to support and shape the UK’s economy and future growth. Through the industrial strategy, the government will harness the UK’s strengths to create an economy that produces high yields for investors and highly paid jobs for working people”. But it does not make any specific committments – such as, for instance, saying that it will ensure that Britain has at least one domestic virgin steel plant or X number of electric car battery producing plants.
On the trading context the “Invest 2035” sticks to post-Brexit platitudes – “the UK is a truly global economy with connections extending to the whole world” – without paying any attention to possible options, like joining EFTA.
More detail may be available early next year, when the government will respond to points made during the consultation and publish the growth-driving sector plans alongside the spending review in spring 2025.