News & Views

Three former government business secretaries – one each from the Conservatives, Labour and Liberal Democrats – lined up at the House of Commons recently to say why they thought a UK industrial strategy was necessary. “The MPs found our views surprising,” the former LibDem leader Sir Vince Cable observed later. “What was interesting was the three-way consensus.”

Whatever the views of the members of the House of Commons’ business and trade committee – who were also taking evidence from the Labour stalwart Lord Peter Mandelson and the Conservatives’ Greg Clark – the chances are high that Britain will introduce an industrial strategy over the next year or so. With a general election likely by the end of 2024, Labour has a strong lead in the opinion polls. It has pledged to introduce a set of “strategic priorities for...industrial policy” should it take office.

With an industrial strategy on the horizon after several years of vacillation on the issue by successive Conservative administrations, Made Here Now is investigating the concept.

The first of three stories examines the recent history of ideas surrounding an industrial strategy. The second – "Labour looks afresh at  industry planning" looks at Labour’s thinking on the topic, homing in on where manufacturing fits in with its economic plans. Thirdly – in "New chance to boost high-growth manufacturing" we consider the often-nebulous notion of “advanced manufacturing”. What does this phrase mean? And once the term is defined, how can it best be supported?

Apart from any change in political thinking at Westminster, many businesses view industrial policy favourably. “Firms are clear that an industrial strategy would bring the benefits of a long-term vision and a stable environment in which they can plan, invest and grow,” according to a 2023 report by the manufacturing group Make UK.

The Bessemer Society, representing mainly small tech-based manufacturers, said this year:

“An industrialisation framework to complement the [UK] science and technology framework would enable priorities and policies to be developed that turn R&D into market opportunity. A long-term industrial strategy, decoupled from parliamentary cycles, would give clarity and confidence.”

Any UK move in this direction would fit into the international context. Industrial strategies are seeing greater favour in many parts of the world, led by the US. President Joe Biden’s administration has pushed through the CHIPS Act, which allocates $39 billion in government funding for domestic semiconductor manufacturing facilities and billions more for semiconductor research and development. It has introduced the broader-reach Inflation Reduction Act, supporting US manufacturing that has succeeded in tempting some European companies to relocate to the US.

The European Union has announced a series of industry-based initiatives. Emmanuel Macron, France’s president, has grandly declared (on behalf of the whole EU bloc) that "we [Europe] need more factories and fewer dependencies". India and China have weighed in with their own ambitious programmes based on manufacturing and advanced technologies.

In the UK, it seems that Labour’s current interest in industry strategy will result in at least a partial throwback to 2008. It was then that Mandelson - as part of the Gordon Brown-led Labour administration – brought the concept back into the mainstream after many years of rejection by the main political parties. Fresh from a four-year spell in Brussels as European trade commissioner, Mandelson had learnt how different countries’ industry policies had a vital bearing on business performance. Brought back into office by Brown, Mandelson was keen to introduce some of this thinking back home. While dismissing any suggestions of a return to the interventionist approach of the 1970s, when the state ran large sectors of the economy and championed specific British companies, Mandelson introduced the idea of an “activist” role for government in areas such as technology, regulation, skills and investment.

A curious mixture of an intellectual and Machiavellian schemer, the Labour politician made a point of showing a “strong and abiding commitment” to open economies and free markets. But a modern government should not shrink from supporting sectors such as “green technology” and nuclear power. Such areas, he said, offered both high growth and the creation of powerful mechanisms that the state could use to put the economy on a more robust footing. If investment and market decisions were left purely to private capital, there was a chance the UK would miss out. Without a broad-reaching strategy there was, he averred, a constant danger of governments creating new policies on a piecemeal basis that were “insufficiently joined up and often overlapping”.

Despite Mandelson’s apparent devotion to industrial strategy, his party’s days in power were soon over. In the 2010 election Labour was swept away by the coalition Conservative/LibDem government. So Mandelson had little time to embed his ideas into the UK’s industrial system, despite winning over to his ideas such powerful allies as Sir John Rose, the hard-nosed chief executive of Rolls-Royce.

Mandelson’s legacy was, however, far from lost. Sir Vince Cable took on the mantle of industrial policy and pushed it on. The former Shell oil company chief economist in 2010 became business secretary in the new government. Helped by his own technocratic and logic-based mindset – arguably a useful set of skills for a senior politician, but one which surprisingly few of them possess – he was given a largely free hand within the Conservative-led administration. An industrial strategy – adapted from some of Mandelson’s beliefs but with many stronger elements – was launched in 2012.

“It is generally better policy to have a framework, a strategy, rather than random interventions as arise, for example, from government purchases of defence equipment,” Cable said.

“[There are] serious market failures in the provision of training, infrastructure, the “d” in research and development and finance which the state needs to correct.” The government had a role as the “entrepreneurial state”, he said, nurturing technology and management innovation. Cable won industry backing for useful projects to back sectors such as automotive and aerospace and buttress UK-based supply chains.

Again, however, there was insufficient time to infuse this way of thinking into the foundations of government policy. After the Conservatives formed their own administration from 2015 - without any need for support for their former LibDem colleagues - Cable’s time at the top-level was dramatically ended. With his removal from power, the concept of a vigorous industrial strategy for the UK became gradually downgraded. The Conservative politician Greg Clark – a milder individual than either Mandelson or Cable and less of a political heavyweight - served as business secretary from 2016 to 2019. But whatever plans he had for industrial policies were barely encouraged by the rest of the Cabinet led by Theresa May. Ministers had other issues to struggle with, not least the chaotic aftermath of the 2016 Brexit vote. Although the term “industrial strategy” featured in the official name of the business department Clark headed, by the time his spell there ended, industrial strategy had virtually disappeared from the agenda.

But the story does not end there. After several years on the fringe of top-level political deliberations, industrial strategy looks like returning to centre stage. The next article looks at Labour’s approach to the subject.

New chance to boost high-growth manufacturing

Advanced manufacturing is a term often used to denote parts of industrial production deemed to be high-tech, fast-expanding, and worthy of government support. For all the ubiquity of the expression, efforts to understand and explain advanced manufacturing have been inadequate. A chance to correct matters may come soon. Assuming the Labour party wins power in the next election and introduces its own UK industrial strategy, it will be in a good position both to unravel what advanced manufacturing means and promote it sensibly.

The role of manufacturing as a sector associated with high levels of productivity, wages and skills is already well understood. Boosting the “advanced” part of the industry - especially as it encompasses many UK businesses that are global leaders - therefore becomes attractive for any government keen to find growth levers.

Rishi Sunak’s struggling Conservative administration chose to highlight this part of the economy recently. But the “advanced manufacturing plan” published in November 2023 by the Department for Business and Trade was disappointing.

The DBT defined the term as “production processes that integrate advanced science and technology, including digital and automation, into manufacturing [helping] UK manufacturers create products that meet future technological demands and enables the UK to lead on the twin transitions of net zero and digitalisation”.

The definition is too narrow. Novel science and technology can spur new ideas and result in powerful new products. But non-technical ideas in management and organisation may also be instrumental in pushing a manufacturer into the “advanced” part of the industry spectrum. Such management strategies include choices over sectors of business to specialise in, groups of consumers or global regions to sell to, and how best to integrate production and services. Even given the plan’s weak attempt at a definition, its efforts to highlight the technologies important to advanced manufacturing – and which sectors are best poised to do well – suffers from flaws. Linked to the plan was £4.5bn of government support over five years for a set of “strategic” sectors categorised as industries where advanced manufacturing can flourish. They include automotive, aerospace, life sciences and energy-related disciplines including offshore wind, carbon capture and nuclear.

While these are important, the list of sectors that can take advantage of advanced thinking in manufacturing is much longer than the paper appears to recognise. Chemicals, industrial machines, instrumentation, and non-automotive parts of land transportation (such as bicycles and mass transit) are just some of the other sectors which contain examples of advanced manufacturers. It is important to recognise this.

In its restrictive selection of industries and technologies, the advanced manufacturing plan follows a similar line to other recent government expositions of key technical disciplines judged important to UK interests.

Pronouncements on the subject have tended to focus more on headline-grabbing areas deemed to be glamorous rather than those that many industry practitioners would consider crucial. During the Liberal Democratic/Conservative government, eight names were on a 2013 government list of technologies appropriate for support: “big data”, space, robotics, synthetic biology, regenerative medicine, agri-science, advanced materials and energy.

Eight years later, a new government register of key technologies included just seven names. Of these, four – synthetic biology, advanced materials, energy and robotics – had appeared on the earlier inventory, with the addition of three new ones – electronics, quantum technology and artificial intelligence. By 2023, the special technologies had been whittled down to just five, including quantum technology, artificial intelligence and synthetic biology from the earlier lists, with the addition of semiconductors and telecoms.

This partial view of what is important in technology has implications not just for manufacturing but other parts of the economy reliant on scientific and technical skills. Commenting on the advanced manufacturing plan, Andrew Churchill, chairman of aerospace parts manufacturer JJ Churchill, points to the document’s inattention to less obviously seductive areas of technology such as welding. “The advanced manufacturing plan is silent on how these ‘low tech’ [employment] roles will be ….[addressed despite their importance] to the advanced sectors,” he says.

So given the shortcomings in current government thinking on advanced manufacturing, what might an incoming Labour administration do?

First it would do well to define the term properly. A new government could adopt something close to the terminology of a 2022 US government document. Advanced manufacturing is, says the US Office of Science and Technology Policy, “the innovation of improved methods for manufacturing existing products, and the production of new products enabled by advanced technologies” .

The explanation provides a commendably broad view, taking in both technology and organisation.

Secondly, Labour ministers and their officials could spell out not just the technologies that are fundamental to advanced manufacturing but the organisational processes too. Here three ideas are crucial.

One is a focus on selling into “niche” areas with narrow parameters that can to a large degree be invented by the participating companies themselves, and to rely on selling services as well as products.

The best example here in the UK is the Formula 1 industry. This involves intensive use of engineering resources to design and make high-grade machines that do little apart from playing the lead role in a global spectator sport built on advertising. Another example is the UK’s Spirax Sarco, a big player in the narrow business of steam-control equipment. Its range consists of 50,000 assorted items of pressure valves and regulators, sold to 100,000 customers.

A second important element is the ability to devise solutions to business problems. The approach is often geared to making products as highly customised “one-offs”, and to the needs of a single customer rather than many.

A third key organisational factor is the facility to excel in a range of technical disciplines – which will probably include information technology and automation but also less obvious areas such as materials and design – and find the common ground between them.

Brompton Bicycle and Renishaw – leaders in folding bikes and measuring instruments respectively, and Made Here Now sponsors – have both achieved consistent success in part through following this approach. But given the UK’s narrow official way of regarding advanced manufacturing, both companies would probably struggle to be recognised in government circles as exemplars.

The third thing a Labour administration might want to do as it looks afresh at advanced manufacturing is to make a decent estimate of how much of the economy this sector represents. Rough calculations based on the criteria spelled out in this article indicate that advanced manufacturing perhaps amounts to about half manufacturing output, so accounting for roughly five per cent of the economy. But a more precise evaluation is needed.

Given the strong role of manufacturing generally in nurturing growth, the advanced part of this sector is worth boosting in whatever way a government thinks – or can be shown – is desirable. How it does this is up to the politicians. Before this can be done it is vital to understand advanced manufacturing correctly and sweep away the half-baked assessments of the past. There must be a strong hope that – assuming Labour forms the next government – it will do a better job on this than the current one.