The UK needs to decide what it wants to be good at
Since the beginning of the year, the flow of stories about the decline of Britain’s industrial power seems to have reached incredible speed. The number of new cars produced in the UK has fallen to a minimum lowest level since 1956. Britishvolt, the country’s answer to Tesla, collapsed into administration. The struggling steel sector has been the subject of potential government assistance. Meanwhile, as the cleantech race between the US, EU and China heats up, the UK’s lack of response remains conspicuous.
The usual approach of British politicians to sectors in need of attention has been to complain about current performance, promise funding and declare a desire to become a “world leader”. From Prime Minister Theresa May’s 2017 industrial strategy and Boris Johnson’s 2021 “growth plan” to the current chancellor Jeremy Hunt’s long-term economic vision, many industries have been the subject of conservative global goals: cryptocurrency, green energy and the future of transportation, to name a few.
As a result, British industrial policy has become a confused mixture of promises to restore British manufacturing and take the lead in the full spectrum of industries of the future. Ambition is important: countries need not only depth, but also a broad industrial base. But this casual approach risks leaving the UK without any real economic identity.
First, a medium-sized economy like the UK does not have the economic weight to compete on all fronts. The US, Chinese and EU labor force, consumer markets, capital and world trade are all dwarfs for Britain. Even if a country could find more public money to spend on multiple sectors, this could be largely wasteful; when deciding on the location of the enterprise, several factors are taken into account, in addition to subsidies. And stretched finances mean a greater need for targeted support.
Second, trying to be good at everything is difficult and skeptical—neither politics nor government departments have the necessary bandwidth to keep pace on all fronts. Instead, having a distinct economic identity will send investors and trading partners a clearer signal about how the UK fits into the global economy.
Britain, in every sense, would be better off if it first decided what it wants to excel at. This does not mean that there is a centrally controlled industrial strategy. Downing Street made it clear anyway that Prime Minister Rishi Sunak suspicious of this approach.. But that means thinking strategically.
The UK must first identify the industries in which it needs to gain a foothold for national, energy and supply chain security. In addition, “the main thing is to understand what the actual or implied comparative advantage is,” he says. John Van Ryn in the Innovation and Diffusion Program at the London School of Economics. Building on these strengths – by improving access to skills and finance and reducing red tape – can help spur growth in trade and investment, as well as increase income and expertise to then empower the UK.
Hunt’s recognition of the need to develop British fintech, advanced manufacturing, life sciences and the creative industries was a start. When it comes to green technologies, the country can focus on the development of specialties such as offshore wind energy, p carbon capture, use and storagewhere it has existing advantages – partly due to geography, but also due to experience in component manufacturing. Rather than trying to win the entire green transition, this could give the country a niche in the global cleantech supply chain. Growing Purity, a paper co-authored by Anna Valero of the London Stock Exchange’s Center for Economic Efficiency, highlights how regions outside the South East are more experienced in these fast-growing specialties. She argues that their support could “promote more regionally balanced growth.”
The UK also has the advantage of being a true leader in sectors supporting industrial development and climate change around the world. Its professional and financial services, as well as research-intensive universities, are world class. All industries need funding, legal support, and research and development to thrive. The importance of the UK as a financial center has made it the best place to develop green finance solutions around the world, and its researchers attract international collaboration and funding. It is important that competitiveness in these strengths does not slip.
Focusing on the UK’s ambition to be a world leader means being proud of what the UK is good at and striving for its global role. Supporting all growing sectors and industries is not a solution. The desire to be great in everything runs the risk of leaving the country great in nothing.