18 January 2018
The Industrial Strategy White Paper promises to build a Britain ‘Fit for the Future’ – will it succeed?
Running to nearly 250 pages the recently published white paper ‘Industrial Strategy’ is a weighty document. It explores the UK’s economy, highlighting four areas which it calls ‘four grand challenges’ leading on to describe five key policy areas which form the ‘Strategy’.
In setting out the four key challenges, the white paper sets out weaknesses that need to be addressed:
- we have an ageing population – by 2042 one in four adults will be retired;
- we have lower than average productivity for an advanced industrial nation – expressed as GDP per hour worked significantly less than Germany, France, the US and Italy;
- we have lower than average investment in research and development – currently 1.7% of GDP compared with 2.8% in the US and 2.9% in Germany;
- we have underperforming regions – Britain’s wealth and economic development is too concentrated in the South-East and one of the reasons for this is inadequate infrastructure.
In this context, the four grand challenges are:
- artificial intelligence and big data – subdivided into:
- artificial intelligence
- machine learning
- data-driven economy
- clean growth – growing the economy whilst reducing carbon emissions.
- mobility – moving goods, people and services efficiently.
- meeting the needs of an ageing society.
Of most interest to businesses is the plan to address low productivity. The paper identifies four foundations of productivity: ideas, people, infrastructure, business environment and places. These are the subject of the five key strategies that are the crux of the paper.
These mostly relate to research and development, stating an intention to increase spending to 2.4% of GDP by 2027 and to increase R&D tax credits to 12%. There will also be a £725m Industrial Challenge Strategy Fund (probably intended to replace funding that has previously been available from the European Regional Development Fund and other EU sources).
The proposal is to improve education in technological subjects. £406m is to be earmarked for training in STEM subjects (science, technology, engineering and maths). There will also be a National Retraining Scheme to assist people in jobs threatened by the new technology to obtain new skills.
£31bn is to be put into the National Productivity Investment Fund to support investments in transport, housing and digital infrastructure. £400m is to be spent on the infrastructure required to charge electric vehicles and £100m on grants for plug-in vehicles.
£1bn is allocated for improving the digital infrastructure by rolling out new fibre networks.
The Government plans to do partnership deals with various sectors with the aim of improving productivity. These sectors are AI, life sciences, construction and automotive. It is also going to set up a £2.5m investment fund, to be administered by the British Business Bank, to encourage innovation. Here again we are seeing what appears to be a replacement for EU funding.
Rather vaguer is the declared intention to review ways of improving the productivity and growth of small businesses. The paper states that according to various studies the average UK manager is less proficient than many overseas competitors, and suggests that small businesses could learn better management techniques from customers higher up the supply chain.
There is a commitment to introduce local industry strategies, and quite a lot of discussion about devolution. A fund will be set up called ‘Transforming Cities Fund’ which will have a fund of £1.7bn for improving intra-city transport.
Likely impact on business
It is clear that the sectors that are most likely to benefit from the new funds are fibre-optic cables, electric vehicle infrastructure, road and rail and construction. Businesses in most industries will benefit if they can demonstrate innovation, but of course that is nothing new. R&D tax credits have been available for many years but their uptake among SMEs has been disappointingly small. With this in mind, in general there is less detail on how government will address and help improve the performance of small businesses.
On the devolution and local industrial strategy point our region may well continue to lose out if political disagreement over the Sheffield City Region is not urgently resolved.
The message to SMEs remains loud and clear: invest in the new technologies, training and research and development; be clear about your new ideas and develop your people. Ensure that you continue to be aware of the financial incentives available in your industry. If the Industrial Strategy is going to succeed try to be a part of it.
As always we are here to help your business grow and prosper. If you would like to discuss your ideas and plans give me a call or email me or one of your local UHY advisers. I look forward to hearing from you.
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