Insights
Earlier this week, the UK government published its Modern Industrial Strategy. In it, the UK government sets out a focus on eight sectors that they see as key to UK success—in economic growth and national security. Focusing on specific sectors should help central government departments make decisions on investment and subsidies at a national level. And it’s tempting for local government to follow suit – double down on these eight sectors (the IS-8) with everywhere from Aberdeen to Yeovil trying to figure out how they can secure more advanced manufacturing firms.
However, local economies are not all the same, and economic strategy should never be a cookie cutter approach.
The Industrial strategy makes reference to this in its opening pages:
“The Industrial Strategy is unashamedly place-based, recognising that stronger regional growth is critical for the competitiveness of the IS-8 and the resilience of the national economy: we will therefore focus our efforts on the city regions and clusters with the highest potential to support our growth-driving sectors”
As economic development teams in Aberdeen, Yeovil, and local authorities in between are digesting the 600 pages in the new industrial strategy and what it means for them, we’d offer some broader advice:
Getting the basics right – focus on drivers of productivity
In many places, the productivity gap within local sectors compared to their UK average is a real concern. For example, within life sciences, a firm making generic pharmaceuticals in one part of the country will be less productive (ie., has less added value per job) than an R&D facility developing new drugs elsewhere. In professional services, a marketing agency primarily doing advertising for local retail and hospitality businesses will almost certainly be less productive than one serving international clients. Local authorities have policy levers that can begin to address that gap. This may be more effective than trying to change the sector make-up and draw in businesses from the ‘IS-8’. Understanding skills, investment, leadership and management, and innovation which affect productivity is critical. As places develop Local Growth Plans and update skills plans, a focus on these broader drivers of productivity will be key. Getting these basics right shouldn’t be sidelined by the allure of the shiny IS-8.
Our resources on interventions to support innovation give a summary of the evidence on supporting R&D, and our apprenticeships and employment training resources both cover supporting skills.
Understand your mix of tradeable and non-tradeable sectors
This doesn’t mean that understanding sector makeup doesn’t matter – it’s important to understand the mix of sectors in the area, the balance of tradeable vs non-tradeable sectors, and what might be constraining their growth. Our guidance on developing local industrial strategy provides a framework for how to think about local strategies. There’s an accompanying guide to using data for local economic policy.
Develop a response that works for your area – avoid a cookie-cutter approach
Our major city regions, like Greater Manchester and West Yorkshire, need to look at where they have strengths amongst the IS-8, and how they support tradeable sectors more broadly. As the new industrial strategy makes clear, the constraints to growth of high-productivity firms are likely to be similar across sectors —access to high-skilled workers, increasing business investment, supporting spillover effects from clusters, and more.
Other places will need to focus on different sectors. For example, many rural places need to address how to make the food and agriculture sector more productive—to address population changes affecting their labour market as well as to address national food security.
We’ll continue to support places with developing economic strategies – keep an eye on our newsletter for more resources.
