Yon 2011, George Osborne used his second budget speech to promise a “Britain held high by the March of the Creators”. UK manufacturing, cut to its knees during the accelerated de-industrialisation of the 1980s, was to rise up and make a triumphant comeback. Britain was going to do things again.
It didn’t happen, of course. By 2016, Osborne’s ideological commitment to a smaller state and austerity had contributed to a steel crisis, falling construction orders and a crisis of confidence in the private sector. In the absence of a proactive government setting strategic goals and using its purchasing power to direct investment toward them, the creators’ march came to a halt in the midst of an unnecessarily prolonged recession. Brexit, by decoupling Britain from the mass market at its doorstep, introduced a whole new world of pain for manufacturers.
Six chancellors later, Britain still lacks a proper industrial strategy and the country’s manufacturing base is still undersized and powerful. Last week, an exasperated report from Make UK, which represents 20,000 manufacturers across the country, called for a coherent plan, before the industry falls behind in an era marked by green transition and new technology. Speaking at the launch of the report, former Bank of England chief economist Andrew Haldane described a new “arms race” with countries competing to establish themselves in the industries of the future. The UK, Haldane said, “wasn’t really in the running on any scale.”
Radical change is required in Whitehall. But a government that remains committed to laissez-faire assumptions seems unwilling to acknowledge that the economic spirit has changed. Supply chain crises during the pandemic, rethinking relations with China, the war in Ukraine, and net-zero targets have brought strategic status back into fashion. Governments are using their economic weight to promote innovation, boost investment and shape national markets.
Through the Cut Inflation Act, the Joe Biden administration is using $369bn (£295bn) of federal money to give American industry a head start in the global green transition. The European Union is responding with a “green industrial plan” that will relax state aid rules and intends to set up an EU sovereignty fund in the summer. According to the chief executive of a British car manufacturer, the incentives offered to investors on both sides of the Atlantic are “much more attractive than those in the UK”.
As the political consensus shifts towards proactive government intervention, Britain risks being left behind if it stands still. It may already be too late to build a substantial battery manufacturing base, which means an uncertain future for the domestic electric car industry. The lure of US subsidies also risks derailing the prospects of Britain’s nascent green hydrogen sector.
Make UK has called for a royal commission to develop a long-term industrial strategy for the country. That is a suggestion that should be followed. But in the short term, the government and the chancellor, Jeremy Hunt, need to read the economic signs of the times much better. A thriving and supported manufacturing sector can play a crucial role in reducing regional inequities and creating new skilled jobs across the country. Without help, the private sector will not deliver. Last month, Haldane joined Hunt’s board of economic advisers. His experience must be attended to.