Industrial strategy? Britishvolt and OneWeb prove markets are usually best left alone
The name of the Department for Business, Energy and Industrial Strategy can leave economists of a certain ilk cold – particularly the last two words. In the UK’s political zeitgeist, industrial strategy has been closely tied to the dreaded concept of picking winners – with the government standing accused of picking individual sectors and indeed companies to succeed, rather than letting the (significantly more efficient) powers of market forces decide who should thrive in the dog-eat-dog world of corporate battle. There is good reason for scepticism – markets, after all, have been the defining force of human progress for centuries.
Such criticisms will come into sharp focus again today, with the collapse of the politically well-loved Britishvolt. On paper, it seemed an example of innovation and ingenuity, and that it happened to be (in theory) located in the north east gave it an obvious appeal to Tory politicians. The firm’s troubles appear to have begun when they agreed to a host of conditions for taxpayer-funding. Private injections of cash then became dependent on the government handing over the cash, and when Britishvolt couldn’t meet those conditions, the whole thing began to unravel.
It is not the first time a Whitehall favourite has gone pop. Satellite firm OneWeb, which was bailed out by government in hopes of creating a global superpower, was recently taken over by a French rival, with the only return to taxpayers a ‘golden share’ which the UK can exercise in matters of national security.
Britain’s real problem though is not the winners it tries to pick, but that we never truly commit to either leaving market forces to themselves or getting involved. As one academic puts it, our approach is “somewhat schizophrenic, with habitual appeals to the virtues of free markets accompanied by selective state intervention to support specific firms and sectors.” Government would be advised to pick one, and stick with it. It’s little surprise we’d prefer the former.