Is Brexit or Industrial Strategy the defining moment for UK prosperity? – Part 2

In my last post on this topic, I outlined the twin challenges of Britain getting ready for a fourth industrial revolution and tackling climate change with new technologies.

The question I ask here is what do we need to do to get there? What levers must we pull and is it possible for government and industry to lead together on this – and not push in opposite directions?

There has been some recognition in recent years of government and industry partners coming together to form industrial strategies that deliver prosperity. We have for example come together to create Made Smarter UK, a programme to promote the fourth industrial revolution. Made Smarter is tackling challenges focused on innovation, leadership and digital skills.  A pilot in the North West is already helping SMEs adopt new digital technologies and we are beginning to see the emergence of brand-new industries, new job creation and increases in productivity. It is very exciting, but our efforts are not enough, and we need to scale them more significantly and nationally, if we are to really prosper from this fourth industrial revolution.

So, my ask is that we need to significantly boost the money going into our Made Smarter technology adoption pilots and allow SMEs to benefit from this support and the rich ecosystem we will create up and down the country. And in terms of creating the new digital technologies, investments made on R&D and innovation by both government and business needs to exceed the current 2.4% of GDP target to greater than 3%. Only with such higher ambition can we become a proud and modern engineering country once more, with a global reputation for world beating innovations that are attracting significant new investments into exciting new industries.

The Industrial Strategy must also go hand in hand with efforts to improve UK’s Infrastructure.

Nothing would do more to undermine business confidence than short sighted threats to scrap HS2, for two very simple reasons. Firstly, it would kill the confidence of businesses wanting to participate in another new emerging frontier sector – the new digital railway sector – which will create thousands of new jobs as we build and export our capabilities. Secondly, if we wind forward 20 years, and we make the wrong decision on HS2 now, we will hopefully have built a new vibrant fourth Industrial Revolution, but we will be running it on the back off second Industrial Revolution rail infrastructure. That is simply not credible.

It is good to see greater support for Northern Powerhouse Rail, but this must be part of a strategy to better connect between the North and the South. If we combine the power of HS2 and Northern Powerhouse Rail with major investments in green technologies such as electric vehicles, energy storage and alternative fuels like hydrogen, we will create a new green mobility revolution. And if we get Made Smarter right, carbon emissions will be reduced by 25% through optimised manufacturing and supply chains. So, in all the new frontier industries I have described in this Blog; Digital Manufacturing, Digital Mobility and Low Carbon energy generation – we can and should be a world leader in new technology that solves global climate challenges.

What is the real reason for the turbo-charged Industrial Strategy I describe?

I believe that only with strategic investment in our frontier industries of the future will Britain again have the chance of becoming a net exporter and generating a positive balance of payments. Such that we can finally afford the increased funding in public services and infrastructure we so desperately need. We can do this, and we can keep inward investment flowing at the same time. It doesn’t have to be one or the other. My view is that an economy that drives the sort of prosperity our citizens expect, needs to have frontier sectors representing 30% of the economy (GVA) and whilst this isn’t an established ONS metric, the UK probably stands at around 20% today (of which 11% is manufacturing which alone generates nearly half of all UK’s exports).

Anything else is living on borrowed time and more of the same failed economics that we have largely followed for 40 years. We are still living with an outdated theory of free market economics which did get our nation out of trouble in the 1980’s, but is not fit for the globally competitive and much faster technology driven world we live in today. And if we don’t do it, the outcome would also be more of the same; older wealth creating industries falling away without enough creation of the new. Higher paid jobs replaced by lower paid service sector jobs and productivity not keeping up with our international competitors.

Right now, we need significant leadership for a turbo charged Industrial Strategy, way beyond purist free market thinking. Only this can will help create the prosperity our country needs and restore business confidence – well beyond Brexit and into the 2020’s