UK industrial strategy and what it means for the construction industry: what we know so far

On 23 January 2017, the government published its industrial strategy Green Paper. Led by Greg Clark, the Secretary of State for Business, Energy and Industrial Strategy, it was seen as a lynchpin for Theresa May’s tenure as Prime Minister.

However, the political landscape has changed dramatically in the last six months, and the Queen’s Speech only referred to the industrial strategy in general terms.

What does this mean and how do we see the government’s industrial strategy developing over the next six to twelve months?

The policy proposal seemingly remains a political priority for the Prime Minister, as it is seen as the main vehicle for ensuring the UK’s preparedness for jobs and productivity post-Brexit. The two clear missions of the strategy are to maximise productivity and achieve better distributed growth across the UK.

The industrial strategy has the potential to provide more investment and policy focus to support the construction industry and there are aspects of the Green Paper that point in this direction. However, more emphasis on construction and its contribution towards GDP and the wider economy would have offered more reassurance at this time of political uncertainty.

We will know more when the government publishes the results of its consultation process and when the White Paper is published by the end of the year.

In the meantime, the Industrial Strategy Commission, launched in March 2017, has recently published its first major report. The report argues that the UK has a compelling need to introduce a framework for strategic economic management and encourages further political and private sector engagement in this process.

What is the industrial strategy?

The industrial strategy is part of the government’s broader “Plan for Britain”, which is intended “to build on Britain’s strengths and tackle its underlying weaknesses to secure a future as a competitive, global nation”. Caveated with numerous references to Brexit, the document sets out a more interventionist approach to government, introducing various new reviews in wide-ranging policy areas.

At the heart of the industrial strategy is an offer to businesses to strike new ‘sector deals’, driven by the interests of firms and the people they employ, to address sector-specific challenges and opportunities. As part of the deals, the government will offer a range of support, including addressing regulatory barriers, looking at new trade and investment deals and supporting the creation of new institutions to provide leadership, support innovation or boost skills.

The policy plan is founded on ‘ten strategic pillars’:

  1. Investing in science, research and innovation
  2. Developing skills
  3. Upgrading infrastructure
  4. Supporting businesses to start and grow
  5. Improving procurement
  6. Encouraging trade and inward investment policy
  7. Delivering affordable energy and clean growth
  8. Cultivating world-leading sectors
  9. Driving growth across the whole country
  10. Creating the right institutions to bring together sectors and places

The government has also created an Industrial Strategy Challenge Fund to be spent across six key areas over the next four years. The aim of the £1 billion fund is to drive progress and innovation that will create opportunities for businesses and sectors across the UK. The six keys areas have been named as:

  • Healthcare and medicine
  • Robotics and artificial intelligence
  • Batteries for clean and flexible energy storage
  • Self-driving vehicles
  • Manufacturing and materials of the future
  • Satellites and space technology

However, the Green Paper is arguably too narrow in its focus. A report published by Sheffield Hallam University on 7 July 2017 entitled “Industrial Strategy and the Regions: the shortcomings of a narrow sectoral focus” goes so far as to conclude that the government’s narrow sectoral focus threatens to widen regional divides.

What does it mean for the construction industry?

Broadly, the introduction of an industrial strategy, focusing on economic policy, growth and increased productivity across the whole of the UK, should be welcomed by the construction industry. However, in its current form, it is arguable that the Green Paper does not fully recognise the important role the construction industry has in enabling this growth through the efficient delivery of housing, infrastructure and other development, nor the knock-on effects that investment in the sector will have in regions and on other industries.

Similarly, whilst there is scope for the key areas of the Industrial Strategy Challenge Fund to impact, improve and assist the construction industry, it is arguable that more emphasis on smart construction technologies, perhaps with specific reference to house building and infrastructure, would be helpful.

We expect that the consultation process will draw out points such as these, which may lead to development of the industrial strategy in favour of the construction industry. We hope that this will be the case and will provide our updated analysis following the publication of the consultation results as well as the ultimate White Paper.

Read other items in the London Market Brief - September 2017