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by GK Strategy 23rd January, 2017

Productivity Plan 2.0? May’s Modern Industrial Strategy

As with any government policy for the foreseeable future, the Government’s Green Paper for a “modern industrial strategy” is inextricably linked to Britain’s exit from the EU. Yet while the nature of Theresa May’s “Brexit” negotiating position is widely viewed as a radical departure from the past, the same cannot be said for this strategy. In fact, the paper carries on much of the thinking applied in the Productivity Plan published in 2015 by George Osborne in his Chancellor days. Many of the ten “pillars” of May’s strategy share a more than casual resemblance to the priorities in Osborne’s plan, such as: low-carbon energy; science and innovation; digital infrastructure; localism/Northern Powerhouse; technical skills education; and encouraging inward investment, to name a few. This is not especially surprising given the strategy itself emphasises the country’s lagging productivity as a major focus of its approach and it would be unfair to characterise the new industry strategy as a carbon copy of Osborne’s plan, especially when looked at through the prism of “Brexit”. Nonetheless, it does suggest that Theresa May’s Government will not shift away too much from the economic thinking of her predecessor’s.

In addition to trade, the industrial strategy’s challenge for business to create sector-specific deals and changes to government procurement are arguably the most distinct themes not found in the Productivity Plan and absolutely vital to the post-Brexit landscape. While the Government has not committed any additional money to these deals, it’s open door policy to invite any sector – regardless of size – to propose a sector plan (in similar vein to City Deals) is a significant shift of policy development. While not exclusive, the focus of the strategy on sectors outside of the service industry is notable and indicative perhaps of what sector plans may be treated as a priority. Certainly, for sectors like pharmaceutical and car manufacturing, the single market and associated regulation are critical components to both industries and will need a very effective deal to avoid foreign companies from moving their business onto the continent.

The proposals on increasing competition for government procurement will be welcome to many SMEs who struggle to navigate the complexity of the process yet it is worth noting this objective has been tried time and again to only incremental success. Arguably, the difference this time will be that ideas for improving procurement will be free of constraints by EU regulation – especially where devolution is concerned (for example, ESF funding which the Government was restricted from allocating responsibility to LEPs by EU rules). This will be a policy area worth watching closely given its potential for small businesses as well as allow local regions to control more investment themselves.

All of this should not be interpreted that the status quo remains or that the Government will rigidly stick to the approach in the strategy. The Government has made clear it is actively welcoming the opinion of businesses across the country to understand what is required for prosperity in the future and the expected fractious nature of Brexit negotiations, which have yet to begin, could significantly alter the playing field on which the strategy is based. On this front business has until April to weigh in on the Government’s proposals. While the paper itself may not be entirely new or contain much that is unknown, the era it prepares for is decidedly so.

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