Business groups back new IPPR blueprint to end flip-flopping and to get serious about green industrial growth

• IPPR sets out framework for green industrial strategy backed by major business groups MakeUK and RenewablesUK
• Government has had 11 different economic strategies, 9 business secretaries and 7 chancellors since 2010
• Companies are crying out for consistency, certainty and clarity says private sector

The government’s constant chop and change of policies and personnel has led to a decade of low investment and low growth, according to a new report by IPPR.

Leading firms say the lack of a consistent industrial strategy has undermined the confidence of businesses thinking about investing in the UK. It has also left the UK behind the USA and the EU, which have been consistently more ambitious in their economic policies over recent years.

From the UK’s ‘Plan for Growth’ in 2011 to Jeremy Hunt’s ‘Growth Plan’ announced earlier this year, there have been a total of 11 different economic strategies or ’plans for growth’ over the last 13 years.

The UK government’s recent failure to attract any bids in its September offshore wind contract auction is just one example of the UK’s avoidable failures in economic planning, the report says – a failure which will result in the UK missing out on billions in investment.

With all political parties talking about economic growth, IPPR has published a blueprint for a modern green industrial strategy that it says would provide consistency, certainty and clarity for businesses.

IPPR’s blueprint builds on what has worked elsewhere and what businesses are crying out for. Moving beyond what it calls “old-fashioned” industrial strategies, IPPR proposes government should use a far wider modern toolkit to “make and shape markets”.

Its outline of a successful industrial strategy would mean government engaging in four key areas:

• Production: Interventions to affect how goods and services reach and are priced in the market, including through funding, low-cost financing, credit, tax allowances, regulations, and product standards. For example, the ban on internal combustion engines spurs car companies to innovate in producing low-emission vehicles at low enough cost to be affordable for consumers.
• Purchasing: Interventions that focus on how goods and services are bought on the market, including via procurement, advanced purchase commitments, tariffs, and consumer subsidies. For example, the UK Covid-19 vaccine reached the market because the government gave AstraZeneca a purchase guarantee they’d buy millions of doses, generating the security needed for the firm to invest.
  
• Planning and governance: An effective industrial strategy needs to set an objective, such as reaching net zero, and outline how government intends to achieve it through institutions. One such was the short-lived Industrial Strategy Council, launched in 2018 to bring together academics, businesses and trade unions to assess government progress, but wound up again in 2021.
  
• Wider economic conditions: Finally, a successful industrial strategy needs to look at the economic foundations that support all firms, such as the labour force, education and skills, infrastructure, and innovation. For example, a consistent system of R&D tax credits supports an increase in business innovation in technologies and practices.

Dr George Dibb, head of the Centre for Economic Justice at IPPR, said:

“Industrial strategy is having a global resurgence but in the UK it’s still talked about in outdated terms. There’s no such thing as a free market - governments shape markets every day. What’s needed is for this to be done in a strategic way, and for this strategy to last long enough to influence business decisions.

“Recent governments have been so confused about industrial strategy that they’ve had 11 of them in 13 years! No wonder businesses are putting investments in the UK on hold.

“It’s time to be clear about the UK’s strategic objectives, like growing the green manufacturing and services we need for the future, and then to use every tool in the box to get us there.”

Prof Juergen Maier CBE, vice-chair of Northern Powerhouse Partnership, former CEO of Siemens UK and member of the Industrial Strategy Council said:

“The inconsistency in UK’s industrial strategy over the last decade is now beginning to show, with not enough business investment flowing into key green industrial sectors. Whilst the UK has many strengths and continues to invest considerable sums into research and innovation, the policies that support it are inconsistent, incoherent, and mostly under-scaled.

“We’re not getting the best returns on our publicly funded research and innovation, with too many opportunities for scaling up in areas from the hydrogen economy to semiconductors often landing elsewhere, like the USA or EU.

“I very much support this report from IPPR and I know that business will welcome the call for more consistency and greater ambition towards a long-term industrial strategy.”

Stephen Phipson, CEO of Make UK, the manufacturers’ organisation, said:

“A lack of a proper, long-term industrial strategy is the UK’s Achilles heel. Every other major economy has a national manufacturing plan, underlying the importance of an industrial base to the success of its wider economy. The UK is an outlier not having one and, if we are to compete on a global stage, we need one as a matter of urgency.

“There is now widespread consensus on the need for such a strategy and the specific policy areas it would address. We cannot keep moving from one initiative to another without setting them in the context of a long-term, wider plan which has consensus and is independently monitored."

Dan McGrail, chief executive of RenewableUK, said: 

“The clean tech businesses we represent are the future of the UK energy industry. Accelerating progress towards net zero represents the most significant opportunity for economic growth of the 21st century. But to achieve this, we need Government to set out a long-term ambitious industrial strategy to create more confidence and clarity for investors in technology, jobs and skills here in the UK, at a time of intense competition from the US and the EU.

“The proposals which the IPPR sets out today show that there are multiple levers which ministers can pull to build an industrial strategy. The potential prize is huge - growing our offshore wind supply chain alone represents a £92 billion boost to the UK's economy by 2040. This is why we're already working with the government on an Industrial Growth Plan for offshore wind, to supply high-value goods and services to our domestic market as well as exporting worldwide."

ENDS