May sketches out modern industrial strategy

UK Prime Minister Theresa May has set out plans to boost industry and innovation, including a suite of measures to overcome the country’s “historic weakness” on commercialising world-leading research.

Speaking at the CBI annual conference today, May told assembled business leaders that in the wake of Brexit the government would adopt a new active role that backs business.

“It is a new way of thinking for government – a new approach. It is about government stepping up, not stepping back, building on our strengths, and helping Britain overcome the long-standing challenges in our economy that have held us back for too long.”

This includes increasing investment in R&D by £2bn (US$2.5bn) a year by the end of 2020 to help put post-Brexit Britain at the cutting edge of science and technology. A new Industrial Strategy Challenge Fund will direct some of this funding into cutting edge research including biotechnology and artificial intelligence.

May pointed to the success of the UK’s open, competitive economy, and its world-leading university research but called for frankness on its weaknesses.

“We have more Nobel Laureates than any country outside the United States, but all too often great ideas developed here end up being commercialised elsewhere,” she said. May pointed to problems with fast-growing firms lacking access to the finance they need, that technical education is not strong enough, and that productivity is too low and economic success too focussed on London and the southeast.

“So these are the long-term, structural challenges the Industrial Strategy aims to address. It is not about propping up failing industries or picking winners, but creating the conditions where winners can emerge and grow. It is about backing those winners all the way to encourage them to invest in the long-term future of Britain. And about delivering jobs and economic growth to every community and corner of the country.”

An industrial strategy green paper will be put out by the government for consultation by the end of the year, with a white paper set for early 2017.

May used the speech to “sketch out” some of the first steps the government plans to take to achieve its modern industrial strategy.

Starting with the creation of knowledge, May addressed the concerns that leaving the EU will prevent skilled research talent from coming to the UK. She said the country “will continue to welcome the brightest and best” but noted that to maintain public faith in the system could only do so by bringing immigration down to a sustainable level.

On top of the additional investment in research, May noted the need to back successful start-ups for the long term.

“For while the UK ranks third in the OECD for the number of start-ups we create, we are only 13th for the number that go on to become scale-up businesses,” she said.

To boost investment, a new panel led by the Treasury will look at how the government can break down the obstacles to getting long-term investment into innovative firms. May also seeks to create a tax system that goes beyond offering a low corporate tax rate to become “profoundly pro-innovation”.

“So we are backing the innovators, and backing the long-term investors but government can also step up to help drive innovative procurement, particularly from small businesses – just as the United States does so effectively. There, strategic use of government procurement not only spurs innovation in the public sector, it gives new firms a foot in the door. In fact, many of the technologies in your smartphone, from touchscreens to voice recognition, were originally commissioned, not by Apple or Microsoft, but by the US government.

“So I can announce today that we will review our Small Business Research Initiative and look at how we can increase its impact and give more innovators their first break.”

May told business leaders that they too have a responsibility to help create this new approach, including rebuilding public trust that has been undermined by a minority of businesses that are gaming the system and playing to their own set of rules. To this end the government will soon publish plans to reform public governance, including executive pay and accountability to shareholders, and proposals to ensure the voice of employees is heard in the boardroom.

The Royal Academy of Engineering described the speech as a welcome response to its calls last week for research and innovation to form the heart of the UK’s industrial strategy.

“The Academy has consistently championed the benefits of an industrial strategy for the UK, and a study that we led on behalf of the engineering profession, published in October, concluded that a renewed focus on industrial strategy is vital to enable us to continue to compete on the world stage after we leave the European Union,” said RAEng president Dame Ann Dowling.

Terry Scuoler, EEF CEO reacted, saying: “Manufacturers are willing to pick up the gauntlet which the Prime Minister has thrown down and contribute to driving up the UK’s productivity performance over the long-term. In response, we now need to see all government departments playing their part by getting behind such a strategy in a joined-up manner, beginning with the Autumn Statement later this week.”