The publication of the UK government's green paper to kickstart delivery of their Modern Industrial Strategy is a welcome addition to this week's International Investment Summit.

And it's promising to see such a clear focus on innovation and disruptive technologies, investment and regional growth alongside much publicised plans to cut regulation and the "policy merry-go-round".

It's also great to see recognition for our advanced manufacturing and Foundation Industries that "produce many of the essential goods, parts, and components needed to sustain and protect citizens in the UK and across the world."

The UK has had 10 Industrial Strategies, Growth Plans or similar since 2011 so let hope this Strategy, when published next Spring, alongside the creation of an Industrial Strategy Council will drive long-term sustainable growth. Particularly if the Council is informed by a broad and high-quality evidence base as promised.

We urge you to have a read and respond to the government's thoughts and questions. Some of the most relevant and key points we'll be responding to on behalf of you and our FIVengage community before the November deadline include:


INNOVATION, ENTREPRENEURSHIP AND R&D
•The UK has weak diffusion and adoption of technologies, ideas and processes. The government recognises that better diffusion and adoption of both established and novel technologies, ideas and processed is a critical part of how UK's ‘follower firms' can improve their productivity.

•Accelerating the rate of innovation and increasing the adoption and diffusion of those ideas, technologies, and processes is an essential step for growing the productivity of our growth-driving sectors. This includes ensuring that data is created, handled, and shared in a way that both unlocks economic opportunities and is safe and ethical across the economy.

•The UK has considerable strengths in RDI and high-quality research institution and innovative firms . However, as we know it can be a struggle to translate these into commercial goods and services domestically. Barriers include access to finance, skills and regulation.

•The government will focus on a range of technologies and their commercialisation. A proposed portfolio of smaller, less proven and more disruptive businesses is welcome alongside larger, well-established businesses in existing sectors.
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INVESTMENT
The UK persistently has low levels of investment and is routinely ranked in the bottom 10% of OECD countries. Clean energy industries are a major driver of global growth and over 90% of global GDP is covered by Net Zero targets. It's estimated an additional £50-60 billion of capital investment will be required each year through the late 2020s and 2030s to achieve our Net Zero ambitions.

The government recognises it needs to;
•support industries to scale up. Particularly those with potential for global competitiveness. This support will address dynamic effects, external economies of scale, and information failures in emerging sectors and in capital-intensive industries, where high uncertainty can deter private investment.

•encourage competitive and innovative business ecosystems. Particularly in industries with low market dynamism and high barriers to entry. It also identifies the importance of strong supply chain linkages between sectors, as supporting upstream sectors can enhance the productivity of downstream sectors. Interconnected value chains can ultimately benefit consumers through better prices, quality, and choice.

•target policy where certain economic activities or sectors produce positive or negative spillovers for the rest of the economy. Tackling under-investment in new technologies where the direct (‘private') benefits accruing to firms are lower than the collective benefits to society as a whole (e.g. technologies which reduce carbon emissions).

•make the UK competitive on a global scale to influence investment. And compete with many countries offering sizable subsidies and incentives to secure internationally mobile investment. They plan to remove barriers and build on the UK's strengths including our world-class network of universities, research institutions, Catapults, deep venture capital pool, and trade openness.

•mobilise capital. And improve ease of access to growth capital and scale-up finance in the UK with access varying between regions, being scarcer and more expensive for SMEs and differing across sectors based on factors such as capital intensity, technology risks, and stage of growth. This also includes government tools such as an expanded Office for Investment and the British Business Bank, grant funding etc.
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REGIONAL GROWTH
Productivity and economic performance in our city regions lags behind that of London and the South East. The government estimates that the gap between actual and potential productivity of the 8 largest cities outside London could be worth £47bn bringing greater benefits to the 69% of the population living in or around our cities.

The Industrial Strategy will:
•focus on areas with the greatest potential for growth. Recognising strengths across the country including Greater Manchester, West Yorkshire, the West Midlands, the North West and the North East for clean energy and advanced manufacturing, they will look to identify and work with city regions, high-potential clusters and strategic industrial sites.

•adopt a place-based approach to policy. Working with Mayoral Combined Authorities and local government on Local Growth Plans over 10 years they hope to support sectors and provide a framework to unlock private investment. They'll also consider locations for New Towns and housing where high housing demand constrains the growth of high-potential clusters.

•support the creation of skills and employment. It will harness R&D investment to build strong regional innovation ecosystems, use financial mechanisms and support local businesses and education providers to understand and address the skills needs specific to their areas, through tailored Local Skills Improvement Plans.
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REGULATION
We know regulation can drive (or hinder) innovation. The government recognises it needs to provide businesses with stable conditions and clear incentives to invest in technology and adopt products which move away from higher emission activities towards Net Zero.

Two key points in the strategy touch upon key issues which you have told us during our research and workshops into regulatory barriers.
•For regulation to be effective, it must be created in partnership with business and regulators.
•The government will identify where new regulatory frameworks can assist in the development of new technologies and allow for new products to be more effectively regulated and approved.

Our research shows the main regulatory challenges across all six sectors are time and cost related....
•The cost of entry and compliance.
•The role intellectual property (IP) plays in enabling innovation.
•Understanding and managing inconsistencies in existing legislation particularly environmental regulations to reduce carbon emissions and the UK's relationship to international laws.

We'll be feeding our research into government who are keen to understand how current regulations and the regulatory environment are impacting growth across the FIs so their recently announced Regulatory Innovation Office can speed up regulatory decision for new technologies.

Published: 16-10-2024