The “Industrial Strategy” mixes strategy with tactics, with the latter overwhelming any sense of strategy. There should have been two documents:
- A strategy document: max 10 pages which would have identified What’s wrong (there must be something wrong otherwise why bother with an Industrial Strategy after 50-odd years) why is it wrong – from this will flow what needs to be done to set the “wrong” – “right”.
- A tactical document would flow from the strategy & might break down into several papers on different subjects/sectors.
The “Industrial Strategy” contains a great deal of wishful thinking – addressed later in this article. In a key part of the Strategy, the UK is positioned as bursting with ideas (which it might be) and the core problem is correctly identified as turning ideas into successful UK companies (and UK employment). However, this latter point (why ideas don’t lead to successful British companies) is not addressed. The paper never asks itself: “if the UK is bursting with innovation & has been for 50 years – where are all the innovative UK companies?” Because the “What’s wrong?” question was never asked – the follow-on questions “where are they” and “why have they not emerged”, with respect to innovative UK companies, is never posed. This goes to the heart of the document – it is not an “Industrial Strategy” it is a shopping list (perhaps not so surprising given the current government thinks national economies function like corner shops). The Strategy takes a descriptive, almost scatter-gun approach, to describing small amounts of government activity. From an ideological perspective this makes sense, since to pose fundamental questions (what went wrong) would expose much of the hollowness of the government’s ideology and activity (or lack thereof) wrt to the economy over the last 40-odd years.
The answer with respect to “where are the innovative UK companies” is simple enough.
- Lack of access to finance – UK banks lend mostly (90%) for property – almost nothing for industry.
- Small innovative companies are snapped up by large (less innovative) companies. Scale for UK companies is never achieved, they are taken over before this is achieved. Dyson and JCB are exceptions. By contrast, Dyson & JCB-like companies (partly family owned companies) are common in mainland Europe – e.g. Rockwool.
Note: the UK has massively de-industrialised since 1979 (manufacturing is now only 10% of GDP). The White paper gives little acknowledgement of this, but why would it, this de-industrialisation is the product of successive neoliberal (Tory/Tory-lite) governments.
The document clearly sees higher education (universities etc.) playing an important educational role. The problem is that Universities are being transformed into money making machines rather than places where original thinking can take place. People with tenure are being judged not on academic results (papers etc) but on revenue generation. At the same time, vice-chancellors are now paying themselves as if they are running companies. The VC of Bath being the most high profile example. The document makes great claims about the UK higher education system – whilst simultaneously it is being eroded from within – a replay of UK industry over the last 50 years?
What follows are extracts from the White paper and comments. The extracts are shown in italics.
Wishful thinking 1
We successfully rebuilt our automotive industry by deliberately attracting investment from abroad, notably from Japan and more recently from India and continental Europe.
Japan Inc and others came over because the UK was cheap & a gateway into the EU, coupled to other reasons such as BMW (for example) buying a “dog” called “Rover”.
Words are cheap, only actions are meaningful
Governments in successful economies have recognised their strategic power and leadership role, allowing them to coordinate and convene efforts to develop and disseminate new technologies and industries.
A friend at Rockwool was in Bulgaria other week. Meeting ministers. Discussing business (EIB & EBRD funding etc) ; all set up by the Danish ambassador to Bulgaria. Danish industry (they have one) funds the Danish foreign service. Their motto seems to be our business is promoting Danish business.
In contrast the UK “foreign office” (nice offices BTW – why not sell them – I’m sure you would get a good price – after all everything seems to be for sale in the UK) seems to be a dab hand at selling weapons – but little else (& in fairness what else does the UK have?).
Governments can make long-term investment that no single commercial or academic player can take alone.The modern nation state is the most powerful means we have of pooling risk.We are willing to take these risks, which means accepting not all will work out successfully. An industrial strategy that avoids risk is no industrial strategy at all.
What notable investments has this government made? It owns no infrastructure apart from roads. QE to banks led to….. a rise in house prices, nothing else.
Detached from Reality 1
More recently, thanks to tailored public support, the UK has built the largest off-shore wind capacity of any country
A mostly a state owned foreign company (Dong) “has built…..etc.”
Begging the question – why is it the Danish government sees an advantage owning an off-shore wind company? Obviously the wind farms generate profits for Dong – said profits going to … the Danish state all generated by UK citizens.
Detached from Reality 2
maximise the advantages for UK industry from the global shift to clean growth
There are NO UK companies of any note whatsoever with regard to “clean growth”. NONE.
Detached from Reality 3
We have great strengths in the underpinning technologies, from ARM’s microchips.……..
ARM is now Japanese owned – after it was sold by, amongst others, UK pension funds. (Note ARM only design MPUs – it did not make them). The “strength” is evaporating like morning mist.
Detached from Reality 4
We have world-leading capabilities in areas including electric vehicle (EV) manufacture, offshore wind, smart energy systems, sustainable construction, precision agriculture and green finance.
That’s why the Green Investment Bank (GIB) was sold to some Australian parasites (Macquarie) – so that the UK could have world-leading capabilities? (& EV manufacture? which British companies in what volume?)
Subsidies for Foreign Companies 1
The government wants to see fully self-driving cars on the UK roads by 2021
Significantly good news for US-based (mostly Calif) suppliers of hardware and software. Any UK companies will get crumbs. Too late – this train has left the station.
We have a long history of bringing transport innovation to the world.
Correct statement if applied to the 19th century when the UK, in 25 years (with human muscle) built 8500 miles of railway. How long did it take to build HS1? I’m sure all those consultants helped (consultants – a UK growth industry BTW).
Regulatory Environments for Foreign Companies
The government wants to see fully self-driving cars, without a human operator, on UK roads by 2021. We will therefore make world-leading changes to the regulatory framework, including updating our code of practice for testing automated vehicles to allow developers to apply to test their vehicles nationwide without a human safety operator and carrying out a project with the Law Commission to set out proposals for a long-term regulatory framework for self-driving vehicles.
Making things easier for foreign companies (hi Amazon, Apple etc etc) to get into the UK and (given HMRC downsizing) not pay taxes.
Subsidies for Foreign Companies 2
Building on the work of the Faraday Battery Institute and the Office for Low Emission Vehicles programme, we have announced a package to support the transition to zero emission vehicles. This includes a new £400m Charging Infrastructure Investment Fund (£200m from the government to be matched by private investors); £100m new funding for the plug-in car grant; £40m R&D funding (matched by industry) for new charging technologies including on-street and wireless projects; and a commitment that the government will lead the way, making 25 per cent of all cars in the central government department fleet ultra-low emission by 2022.
Missing – any mention of helping British companies to make cars? The above is a subsidy payment to BMW & other non-UK car producers (who don’t pay UK taxes – but are kind enough to employ people). Note that the £400m is a 50/50 split – gov – private (although this is only mentioned later in the doc).
ensuring the UK continues to be a world leader in the development, manufacture and use of these vehicles
The “UK” is a location where EVs might be made – but they ain’t made (in any meaningful volume) by British companies.
While we score well on measures of research and innovation, we need to do more to ensure this translates into improvements in earning power.
Translating: none of the research & innovation ends up with British companies employing well paid British workers.
Wishful thinking 2
Transforming construction, up to £170m* – The way we create our buildings has not changed substantially in 40 years and needs a drastic overhaul if it is to deliver the buildings that the UK needs. Construction is currently expensive and too many buildings waste energy. We need to transform construction so that we can create affordable places to live and work that are, safer, healthier and use less energy. By taking a lead in the UK, we can increase our ability to export. Global demand for efficient buildings is rising rapidly, driven by the pressures of urbanisation, affordability, and the need to cut emissions.
There are many problems with the “construction sector” (which funds the Tory party). The first is an unwillingness to change building systems/methods – legislation is needed to change these attitudes. However, the sector succesfully lobbies against against any changes using the simple expedient of money (withheld donations). A related problem is a lack of skilled workers, which is why there are so many non-UK people in the sector – why train when you can poach?
Looking Backwards – Fondly (Page 91)
Through the EU Horizon 2020 we have received 20 per cent of all awarded European Research Council(ERC) grants73; we are a ‘top five’ collaboration partner for all member states in the Horizon 2020 programme;
True, but with Brexit, the collaboration with EU partners is finishing.
Wanting a future agreement with the EU & getting it (given the current crew in gov) are two entirely different things.
Ditto to Wishful thinking 2 (Page 94)
The United Kingdom has one of the most successful labour markets in the world. Our employment rate is at a near historic high – one of the fastest post recession rates relative to other major economies. It is underpinned by a world-class higher education system, the first choice of students and researchers around the world. Employers are ever more closely involved in the system, and we are committed to delivering three million apprenticeship starts by 2020.
Which is why the building trade depends on non-UK people?
(& why an energy efficiency for buildings programme worthy of the name could not take place because of a lack of sufficiently skilled people)
Which is why the NHS could not function without non-UK people?
Which is why it is almost impossible to recruit electrical engineers? (reason? -many most are in the City of London working in “finance”).
No mention of unchanged pay rates since 2008.
A range of stock pictures were used to illustrate “technology”. The equipment in the picture was out of date when I was at school in the 1960s. This suggests that the bunch that put the “Industry Strategy” together don’t have a clue with respect to what does advanced technology look like (hint: not like this).
Half Truths Page 129
Our investments in infrastructure, and our decisions on procurement, are among the government’s most significant interventions in the economy. They are large-scale – our National Infrastructure and Construction Pipeline is worth around £600bn of public and private investment, and we spend 14 per cent of GDP on public sector procurement each year.
What proportion of GDP goes on defence?
No breakdown of what gov spends (of £600bn) and private sector & in what areas.
(probably mostly roads gov – mostly everything else the private sector).
We love foreign ownership of infrastructure (Page 129)
In many important respects we have a strong track record and we will continue to promote the UK’s strengths as a destination for capital investment. In 2016, the UK had the most attractive environment for infrastructure investment when compared to 25 international competitors
& having British institutions investing in UK infra? Promoting that as opposed to foreign capital?
The Great & The Good (Page 131)
We have established the National Infrastructure Commission to advise us on investment.
The “great & the good” – no citizen involvement
(oh I’m sure they do “consultations” – or should that be “insultations” – i.e we have already made up our minds but have to go through the motions).
Desparate Stuff 1 (Page 134)
An early example is the National Shipbuilding Strategy, where we have begun work to understand how UK shipbuilding can maximise prosperity for the UK and its constituent nations and regions.
Translation: we need to keep a capability to build warships – because there is ZERO in the way of civilian capabilities left.
Buy British? Page 134
We will improve our digital procurement platforms to make it easier for suppliers to do business with the government, for example through implementation of the Crown Marketplace purchasing platform
Who supplied the “platform”? (guess – ATOS? (French) Fujitsu? (Japanese), Siemens (German) etc). Will the platform favour British companies? Or continue the UK government policy of favouring anything but British companies? (on the basis of value for money – as opposed to value for the UK).
Industrial Strategy? (Page 135)
We are investing £2.6bn to better protect the nation from flooding, including more than 1,500 flood defense schemes, which will protect 7,500 households and provide £30bn in economic benefits
The UK gov, via the EU’s CAP, subsidies flooding – it pays to ensure there are floods. Catchment basins are farmed in a way (& in line with CAP/UK government policy) to maximise water run-off. & cause floods, the impact of which the gov now proposes to subsidise? An example of joined-up UK gov’ policy?
Schizophrenia? (page 136)
Heathrow Airport has invested more than £11bn in the last decade including building the new Terminal 2 and Terminal 5. It is one of Britain’s biggest infrastructure clients spending more than £1.5bn annually with 1,200 suppliers from around the UK.
The document talks about climate change – the above goes in the opposite direction.
(& in that sense is exactly the same as the previous point)
Business-based flying is in decline. 70% of Heathrow passengers are middle class from SE England. Development of Heathrow is a subsidy for the middle classes of SE England & inconsistent with all gov climate change objectives.
continuing (page 139)
We have the third largest aviation network in the world and are developing a new Aviation Strategy to build on our strengths to create a safe, secure and sustainable aviation sector for a global, outward-looking Britain. We are also making progress towards delivering much-needed new airport capacity in the south east.
Is that something to be proud of? much needed for the well off to take multiple foreign holidays and “stuff the CO2 emissions and planet” – sustainable aviation sector – a classic oxymoron.
“Planning the next war based on the last” (Page 137)
In addition, we will fund a new Major Road Network to improve connectivity by targeting funding at strategically important local authority ‘A’ roads
Self-drive cars will lead to an overall reduction in car ownership. Self-drive in towns & cities will mainfest itself as a rising number of driverless taxis (shared or not). “Connectivity” will thus improve because there will be fewer cars (honestly – do you really enjoy driving?)
Foreign Focus – Always (Page 145)
We will promote overseas investment in the UK’s clean economy and strengthen our support for UK exporters through better identification of overseas opportunities, industry briefings, overseas missions, pavilions at key international events and campaigns for sectors and industries that are delivering clean growth…
Is there a problem with promoting the UK’s clean economy to the UK finance sector? To British investors? A core problem with this document is the focus on “overseas investors” – are there no British investors? What about UK banks – given the QE they recieved?
Infrastructure: Electricity (Page 145)
We aim to implement our Smart Systems and Flexibility Plan in full by 2022, enabling the electricity system to work more flexibly and efficiently.
The problem is the UK DNOs. Remunerated on their asset base, and focused on getting others to pay for additions to the asset base. The problem is a regulatory problem which successive Tory & Tory-lite governments have never been able or willing to address – how to control private monopolies (answer – make them public monopolies – in most cases it worked well for 40 years).
Investing in Civil Disturbance (Page 149)
The emerging shale gas industry offers the prospect of creating jobs, enhancing the competitiveness of downstream sectors and building up supply chains. We are considering how to implement our proposal for a Shale Environmental Regulator
The emerging shale gas industry offers the prospect….of rising civil disturbances and the criminalisation of increasing sections of the population for very modest gains. That said, the shale gas industry contributes to Tory party coffers – so that’s alright then.
Broadband, BT & Snails (Page 151) p1
We are building on the success of our Superfast Broadband Programme, which will provide 95 per cent of UK premises with access to superfast broadband by the end of this year
BT tested the first overhead fibre line in 1980 between Machynlleth and Dolgellau. BT is still struggling 37 years later to get broadband/fibre to rural communities. Successive governments have failed to regulate BT’s private monopoly (also see comments on DNOs) & have failed to force the company to act in a prompt fashion with respect to broadband to rural communities (recall the £25 million fines levied on BT last year). In some cases, this has led to communities installing their own broadband connection. This is a pathetic situation for a G7 country.
Broadband, BT & Snails (Page 155) p2
Full-fibre is the gold standard for fast and reliable broadband. We are investing £200m in the Local Full-fibre Networks Challenge Fund to stimulate commercial telecoms network providers to build more full-fibre connections to homes and businesses across the UK
In the early 1990s BT invented “blown fibre” a fast and easy way for one/two people to install fibre. BT’s networks down to local level are all ducted. The installation of fibre in these ducts is trivial. This leaves the connection – household to duct. If the gov were serious it would fund the whole thing itself – with the proviso – only British workers, only British materials & equipment. It should then take ownership of the local fibre network (ref: Sweden – local network owned by local gov).
As for “Vodafone and CityFibre” – it will cherry pick the most profitable locations – which is what the private sector does (and who would blame them?)
Electricity Costs & English Understatement (Page 160)
We recognise that our industrial electricity costs are currently higher than those of our competitors.
Most of the time (95%) the elec interconnectors from mainland Europe to the UK operate in one direction (Mainland to UK). UK wholesale prices are around 50% higher than, for example, Nordpool prices. Guaranteeing Hinkley Pointless £100/MWh (& rising) will make things worse. The over priced UK electricity market is so promising that there are around 8 – 10GW of trans-North Sea cables being planned. Successive UK governments have ensured a “sure thing” for those (according to Brexiters) “sneaky continentals”. In footballing parlance, it is as if England repeatedly and deliberately keeps scoring own goals whilst saying “ha! that will teach them”.
Stating the Obvious, English Understatment & doing nothing substantive (page 164)
Our challenge is to improve how we spread the best practice of our most productive businesses. We are one of the world’s great financial centres, yet growing businesses sometimes face difficulty in accessing finance.
The small number (4?) of UK banks lend to the property sector. For the most part they do not lend to industry. Germany has 2000 regional banks – which lend to the German mittlestand. As noted at the beginning, this document fails to consider “what went wrong & why”. Neither does it give consideration as to what other countries do. It never has and the current gov never will (after all – why would you want to learn anything from a “bunch of bloody foreigners”).
continuing (page 169) – Delusions
Britain is well-placed as one of the world’s great financial centres, with access to a deep pool of capital and domestic and overseas investors attracted to our reputation as a rigorous jurisdiction. However, we have not made the most of this advantage in providing access to finance for growing businesses.
The City of London has zero interest in English provinces – except as a location for shooting/fishing/hunting. The focus is global, not national/regional. The City may have a deep pool of capital – but it is not the sort of capital that is interested in funding (for example) an SME metal basher in Birmingham. This needs local banks with local understanding. That the writers of the “Strategy” think that the City has a role to play in the UK’s industrial revival – shows the depths of their delusional thinking.
The new policy – just like the old (non) policy (Page 165)
The role of the government is not to pick favourites and subsidise or protect them; rather, it is to ensure that the British business environment is shaped by competition and contestability in which the best businesses of all sizes can thrive
This is the policy pursued by UK govs of all political complexions since 1980. It has been a total failure for 37 years and will continue to be so. Until UK govs, start supporting UK companies & in some cases protecting them – the same old same old will happen – promising UK companies snapped up by overseas competitors – capitalism red in tooth and claw.
Hand Wringing Page 171
Parts of the UK economy are unusual in having underdeveloped domestic supply chains. Fixed capital investment is another factor important to productivity growth. The UK’s investment rate is lowest in the G7. Many UK businesses, including large listed businesses, are not investing as much as our competitors’ businesses in skills, technology and equipment.
& gov proposals? ……….silence. Tough problem, which has existed since the late 1950s (failure to invest in fixed capital) partly due to a fixture on short term results. Muchly due to very very poor management. Example: if you have ever wondered why Japan came to dominate motocyles the answer lies in “precision die-cast horizontally split crankcases”. These products needed limited machining and allow the economic production of multi-cylinder and by definitioon more powerful motorbikes (6 cylinders? no problem). Precision die-casting needs investment in machines able to do undertake this. In the 1950s and 60s Honda et al invested in such equipment, Norton et al did not. The rest is history and one which was repeated in almost all UK industrial sectors – a failure of management to plan, a failure to invest, a failure of British finance markets to encourage British companies to invest. The great UK invention of the 1960s? Asset strippers – people that identified undervalued British listed companies, took them over and broke them up. John (pretty thing) Bentley was one example (see Private Eye – passim).
At page 171 of the “Industrial Strategy” paper I started to lose the will to live.It really is that bad. As already noted, this is not a strategy document, it is a shopping list. Most of the actions fall into the category of deck chair re-arranging and will not make the impact needed to even halt, let alone reverse the UK’s industrial decline. It is understandable why the document is structured in the way it is.. If the industrial problems facing the UK were properly identified & acknowledged (instead of being hidden behind understatement and half truths) it would become apparent that there needs to be root & branch reform of the banking system, how monopolies are controlled and how to ensure that British companies are funded and protected as they grow. None of this is addressed.
The problem in addressing the UK’s industrial decline would be akin to the boy in the “Emperors’ New Clothes” story – shouting “he’s got no kit on”. Everybody would realise that over the last 40 years (nay 60 years) British industry operated under an ideology that has pauperised the UK, from an industrial point of view, whilst also increasing social divides and regional divides. Tory governments of all stripes (full strength and lite) were responsible. The likelihood of the current one admitting to this is zero. Hence the “Industrial Strategy is a shopping list” is the only approach the Tories can take or indeed understand..