Towards an Effective Industrial Strategy for Britain

 

by Charles Regan

Britain, alone among western Europe’s major economies, does not have an industrial strategy. Ever since 1979, successive governments, New Labour as well as Conservative, have  elected to consign the fate of Britain’s industries to ‘the market’. Since 1979 manufacturing as a share of the overall economy has shrunk from 29% of GDP to 11%, leaving Britain import dependent and shifting from a balance of trade equilibrium in 1979 to a balance of trade deficit of  up to £13 billion per month by the latter part of 2016. Unemployment stands at c. 6 million, or 20% of the workforce, when total unemployment is calculated, when people on work programme, workfare, benefit sanction, DWP mandated ‘training courses and others are included.

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Background

In 1945, a Labour government was elected with a majority  of 145 seats, on a radical programme which included taking strategic industries such as coal, steel and transport into public ownership and an active and interventionist industrial strategy founded on collaboration between governments, employers and trades unions,  providing a stable  foundation for postwar economic revival. The principles that government implemented were adopted by every successive government until 1979.  The ‘postwar consensus’, as it was called, ensured more or less continuous full employment, funding for industry and  increasing prosperity for ordinary people and their families. Its policies also led to a decline in  Britain’s national debt from a level of 250% of GDP in 1945 to less than 50%  thirty years later.

Following the election of Margaret Thatcher in 1979, the  policies of the postwar consensus were abandoned. Industrial strategies were ditched. Britain’s publicly owned industries were sold off. Investment funding was truncated and Britain’s financial sector became increasingly focused on short term, risk free, maximal returns. ‘New Labour’ under Tony Blair enthusiastically  embraced  Thatcherite  policies of non intervention in the economy and  belief in an  economy based on finance and services.  Many manufacturers, starved of funding, closed down. Those sold off to overseas buyers often closed  and the order books were taken to other factories overseas. By mid 2009, Britain’s  balance of trade deficit had ballooned to £6 billion per month as Britain became yet more import dependent. Since then, the situation has worsened.

A New Industrial Strategy

An industrial strategy for the 21st century should  include the following;

1) A  commitment from government to a re-balancing of Britain’s economy away from  emphasis on finance and ‘services’

2) A reduction in the balance of trade deficit with a goal of achieving equilibrium

3) The lessening of Britain’s import dependence

4) Full employment through  the creation of skilled, well paid jobs in resurgent manufacturing industries

5) Re-skilling Britain’s workforce to provide trained employees in resurgent industries

6) The safeguarding and reinforcement  of strategic industries through public ownership, either wholly or in part
7) A reduction in overseas ownership and control of Britain’s industrial sector

8) The creation of  a national investment bank tasked with providing investment capital for industry on terms congruent with the needs and timescale of industry

The organisation set up and charged with implementing  Britain’s industrial strategy should  comprise stakeholders including government, the finance sector, public and private firms, workers’ representatives, local councils, trades unions and  schools, colleges and universities.

A detailed analysis of  the present position would establish the basis for future planning and resource allocation, and include the following;

a)  what firms presently produce and their production capacities

  1. b) what R and D exists and in which fields
  1. c) identifying imports and deciding which, out of these, Britain could produce itself
  1. d) what skills exist in the workforce at present and where
  2. e) what training and courses are currently available, and what  will be needed in order to train the workforce  needed to perform the jobs which will be created
  1. f) what level of financial resources will be required in order to provide the required investment capital for industry, and over what timescales would funding be required

 

To kick start demand for British products the adoption of a holistic public sector procurement procedure which would tend to favour British suppliers. This measure would offer  gains in the short term and  assist longer term growth. Holistic procurement policies are already in place in several other EU member states.

Where British products are no longer  made, policies of import substitution would  form a solution in the short to medium term. These  include  making products under licence from an overseas manufacturer,  while at the same time providing ultimately for  products designed and made here.

A new industrial strategy for Britain is essential  to ensure that the talents and abilities of all our people, regardless of background, are harnessed and  to enable them  to live stable,  prosperous and fulfilling lives.

 

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