The EU referendum paved the way for the industrial strategy now defining Theresa May’s first weeks in office. Why? Because the provincial English working class and lower middle class forced the country out of its status quo and administered a huge shock to the system. Politicians are realising that options they never previously considered are now open to them.
Brexit provides some policy options that were once impermissible. Most obviously, there is state aid – much of which was banned under European law. In addition, the government could reduce energy costs for businesses by allowing EU regulations to fall away on the country’s exit. Environmental lobbyists have already raised the alarm on this issue.
But these legal possibilities are less important than the shift in mindset the referendum created. After all, the Conservatives are unlikely to exploit such legal opportunities: they have rightly been sceptical about the benefits of state aid and they have been positive towards greener environmental legislation.
Since Tony Blair’s premiership, but accelerated under David Cameron, the provincial English working class and lower middle class barely existed politically. Both main parties focused primarily on the richest and poorest, ignoring so-called C1/C2 voters previously considered as the parties’ primary electoral audiences (amounting as they do to nearly half England’s population).
The referendum was ultimately a victory for these voters and it is clear that the government has heard their voice. Speeches that May has given in the last few weeks – in her short leadership campaign and upon her appointment as Prime Minister – have repositioned British politics towards them.
Whoever these C1/C2 voters are, they are not small-state libertarians. They are pro-business but believe government has a role in the economy and wider society. They are particularly irritated by those they believe exploit the welfare system, but they are also dismayed about perceived unfairness at the top. There is a hunger to see the government act to create more opportunities outside the South East.
What will an industrial strategy look like in this new world? Reading the substantial tea leaves available to us, it looks as if the government’s new Department for Business, Energy and Industrial Strategy (BEIS) will have four key pillars, although what these will look like are inevitably unclear at this early stage.
Firstly, and most importantly, the government is determined to rebalance the economy away from London towards the country’s other big cities. That will mean further state-backed infrastructure projects, and presumably the shifting of more government jobs to the regions and tax incentives for businesses to relocate or start up in particular areas. Intriguingly, May also indicated that local communities should see – US-style – more of the benefits of things like oil and gas exploration.
Secondly, the government looks committed to higher spending on research and development to boost productivity. Thirdly, despite waving through SoftBank’s purchase of Arm, the government has indicated it will take a more interventionist approach to foreign takeovers of important British firms. Fourthly, the government looks set to intervene some way in corporate governance, for example to give workers more of a say on key decisions within businesses and to boost shareholder power.
In their own ways, each of these pillars could be seen as strengthening the hand of the regions. It is easy for politicians to talk about things like “industrial strategies”. Implementing them is obviously very different. But while the political establishment has not changed much in terms of personnel – with a Prime Minister that backed the losing side in the referendum – their DNA has been changed by their direct exposure to provincial England. So it is safe to assume that this new government will at least try to execute a major change, regardless of how it ultimately ends.