Industry calls for Royal Commission on Industrial Strategy – Make UK report

Ambition should be growing manufacturing to 15% of GDP

Key findings

• Majority of companies believe there has never been a robust Government vision for manufacturing
• As a result, companies say lack of an industrial strategy hinders their ability to access skills and puts them at a competitive disadvantage compared to other Nations
• Manufacturers believe an industrial strategy would provide long term vision, a stable environment and accountability
• US Inflation Reduction Act worth 1.5% of US GDP, UK equivalent would be £33bn
• Most companies believe an industrial strategy should be monitored by a non-Government body and reviewed every three to five years
• Manufacturers believe technical and management skills should be the core priority of an industrial strategy, followed by innovation, green transition and digitalisation

Britain’s manufacturers are calling for the establishment of a Royal Commission as a starting point to develop a long term, modern Industrial Strategy which would help provide companies with a vision and a stable environment to invest, access talent and grow their business.

This would be backed by a new Industry Strategy Council to ensure the strategy is monitored by an independent body, while the Cabinet Office should be given responsibility for policy co-ordination across Government not the Business Department.

The call was made on the back of a major report and survey published today by Make UK, ‘Industrial Strategy – A Manufacturing Ambition’.

The report comes at a crucial time for the UK economy which risks being squeezed between the substantial impact of the US Inflation Reduction Act (IRA) which is drawing in green investment in particular and, similar counter-measures being introduced by the EU. Furthermore, the last few years have seen competitors, in particular France and Germany, implement far reaching industrial strategies towards 2030 (1). The IRA alone is worth 1.5% of US GDP which, if the equivalent sum were to be invested in the UK, would be worth £33bn.

In response, Make UK outlines an ambition not just to address the accepted challenges around skills, innovation, infrastructure and the business environment but, the opportunities from a rapidly changing policy landscape including green transition, digitalisation, levelling up and accelerating technologies such as AI and Augmented Reality.

The report also sets a target of growing the manufacturing sector to 15% of GDP which Make UK estimates would add an extra £142bn in output annually, creating high-skill, high-value jobs.

Stephen Phipson, Make UK CEO, said:

“A lack of a proper, planned, industrial strategy is the UK’s Achilles heel. Every other major economy, from Germany, to China, to the US, has a long-term national manufacturing plan, underlying the importance of an industrial base to the success of its wider economy. The UK is the only country to not have one. If we are to not only tackle our regional inequality, but also compete on a global stage, we need a national industrial strategy as a matter of urgency.

“There is now widespread consensus on the need for such a strategy and the specific policy areas it would address. We cannot keep flip flopping from one initiative to another without setting these in the context of a long-term, wider plan which has consensus and is independently monitored.”

According to the report, almost six in ten manufacturers believe Government has never had a robust vision for manufacturing, while two thirds say the lack of an industrial strategy hinders access to skills. Furthermore, eight in ten companies believe the absence of a strategy puts their company at a competitive disadvantage compared to other manufacturing nations, while a quarter said it is the main reason the sector has not grown more quickly over the last decade.

By contrast, manufacturers are clear that an industrial strategy would bring benefits, with nine in ten saying it would give them long term vision, eight in ten a more stable environment and, three in ten much needed accountability. Half of companies believe it would aid public-private co-ordination, while almost four in five companies (77%) believe a strategy should be guaranteed beyond Government terms and administered by a separate body to review it every three to five years. Seven in ten companies want to see skills as a core function of an industrial strategy, followed by innovation, digitalisation and green transition.

Make UK added that such a long-term vision and stability contrasts with six plans for growth since 2012 (2), while the department responsible for managing industrial strategy has been re-organised five times in the last fifteen years with fifteen Business Secretaries in the same period.

In response, according to Make UK, any industrial strategy must think long-term, be independent of unnecessary interference, and driven by industry for industry.  It must provide clear strategic direction as well as adequate channels for monitoring, evaluation, and accountability. It would enable funding, support, and interventions to be targeted at the places that need them the most, co-ordination and co-operation between all stakeholders, private sector companies, universities, colleges and research institutes, all levels of government, and independent delivery bodies.

In order to begin this process, Make UK has made the following recommendations:

1. Establish a Royal Commission on Industrial Strategy to determine a cross-party consensus on future priorities and ambitions for manufacturing and the wider economy, with aims and objectives that the state regards as strategically important markers of success. These would be used to inform wider industrial strategy planning in five key areas, skills, innovation, green transition, infrastructure and the business environment. Such a strategy should include growth targets and timeframes with responsibilities for delivery for both the private and public sectors.
2. Re-establish an Industrial Strategy Council (ISC) underpinned by statutory status to ensure longevity. The ISC’s remit as an independent oversight body should be to ensure rigorous evaluation, monitoring and efficacy of policy delivery. The ISC could collate timely information on and, provide a feedback mechanism for, better policymaking for the delivery and implementation of targets across all levels of government.
3. The Cabinet Office should be made responsible for ensuring cross-government

co-ordination and implementation of industrial strategy. Following a plan devised via consultation with all relevant stakeholders, the re-established ISC should be provided with a mandate to inform and advise the Cabinet Office on ways to improve policy delivery.

4. As part of the Royal Commission, stakeholders should negotiate and agree institutional reforms to ensure the stability of policy delivery and outcomes. Such reforms should include alterations to the regulatory landscape, such as the corporate governance code, to incentivise private and public sector best practice and long-term productivity growth for the benefit of the public good.

The survey of 312 companies was carried out between 5 and 14 April.