If Britain had our industrial strategy, the boost for manufacturing and life sciences in the last 20 year period, this would have contributed an astonishing extra £484bn into the economy, writes Sharon Todd
Tomorrow, Chancellor Jeremy Hunt has vowed to respond to business leaders who have been deeply concerned by the abandonment of any form of industrial strategy. The policy was officially dropped by the then-business secretary, Kwasi Kwarteng, in 2021, though the strategy had already drifted for several years.
There are few promising signs, however, that the government will produce a detailed strategy to boost UK competitiveness. An industrial strategy in name only will not deliver the potential of our high value manufacturing, research, life sciences and green technology sectors to be economic engines.
Despite being the world’s sixth largest economy, the UK is currently staring down the barrel of a global growth gap. The International Monetary Fund forecasts that the UK is set to grow by 0.6 per cent next year. Key factors such as inflation, interest rates and reduced room for growth align, to an extent, with other Eurozone nations such as France and Germany. However, the UK is expected to have the lowest level of growth, within Europe as well as amongst G7 countries too, where all nations bar the UK have an industrial strategy.
Under Rishi Sunak’s government, inflation has halved from a very high point earlier this year, but another key pledge – growing the economy – remains far off.
On a global scale, our lack of an industrial strategy points to a serious gap between the UK and our competitors. Over the last 20 years UK growth averaged 1.5 per cent. At a global level this was 3.6 per cent; high growth nations such as Ireland and Singapore averaged growth rates of 5.5 per cent and 5 per cent respectively.
These countries in particular have well-defined industrial strategies, driven by government. This translaes into considerable investment in high growth manufacturing sectors including life sciences and, more recently, renewable energies.
Take, for example, manufacturing, where economic value is generated through jobs, indirect investment in the local economy and taxes. The UK’s share of manufacturing as a percentage of the economy has been in steady decline for decades. It has fallen from over 30 per cent of GDP in the 1970s to less than 10 per cent – the lowest of the major economies.
The last two decades have been a lost opportunity. Put in simple terms, if the economy had grown at an extra percentage point every year during the last 20 year period, this would have contributed an astonishing extra £484bn into the economy.
Other sectors demonstrate the opportunities available. The pharmaceutical market is valued globally at £2 trillion, and clean tech at £1.2 trillion. Both are showing strong growth rates of 6 per cent and 12 per cent per annum respectively.
The UK’s performance in the pharmaceutical sector has been at best lacklustre. Opposite to major pharmaceutical manufacturing countries – which have all grown exports – the UK’s pharmaceutical exports have been in decline for ten years. Germany has consistently been a leader in pharmaceutical exports and has maintained that position during the same period.
A recent report by LEK Consulting, commissioned by SCI, estimated the value opportunity in life sciences and clean tech alone to be worth £230bn in GVA, with an additional 240,000 of new jobs by 2030.
To achieve this, however, takes detailed policy guidance from the very top. An industrial strategy for science, for example, would include simplifying R&D tax incentive schemes, ensuring scale up capital is available, and the UK is globally competitive to attract in investment for large scale projects.
We will wait to hear from the Chancellor tomorrow, but industry fears his words will not be enough. The UK has some great assets to deploy, but these have not been effectively exploited to generate impact.