Countries that are serious about manufacturing have industrial strategies. The United States and China have one. The same goes for Germany and France.
Britain does not have an industrial strategy. Rishi Sunak talks about turning the UK into a “scientific and technological superpower”, but that’s all: talk. It is a public relations strategy disguised as an industrial strategy.
Challenged by Joe Biden’s Inflation Reduction Act (IRA), the government says it has no need to respond to Washington’s green subsidy package because Britain has already established a thriving renewable energy sector and the Americans are playing ball. above. The complacency is amazing.
Andy Haldane, former chief economist at the Bank of England and now chief executive of the Royal Society of Arts, had this to say last week. “The world is currently facing an arms race on reindustrialization. And I think we risk falling behind in that arms race unless we give up.”
China, Haldane added, has been focused on green technology for many, many years and has advanced technology such as solar power and batteries. “The West has woken up late. The IRA is throwing money at the wall on that. the cost of it [is] almost certainly north of half a trillion dollars. Possibly north of a billion. The EU is now catching up, [and] the UK is currently not really in the race on any kind of scale.”
A quick glance at the latest trade figures shows that Britain has a ways to go before it can be considered a manufacturing “superpower”. That was true once, but not anymore. The share of manufacturing in the economy fell from more than 30% to less than 10% of national production during the reign of Queen Elizabeth II. The goods deficit, which has not been in surplus since the early 1980s, stood at £55bn in the first three months of 2023, with imports more than 50% higher than exports. A quarterly surplus of £40bn in services was not enough to close the trade gap.
Those who supported Brexit say the UK now has the freedom to export more to those parts of the world economy that are growing the fastest. Brexit opponents say exporting to the EU has become more onerous. Both are right, but both are missing the point. Before Britain can take advantage of export opportunities, it must have things to export. The fact is that the UK is no longer a blue-chip manufacturing economy and has not been for decades.
Dyson’s recent announcement that it will build a new battery factory in Singapore is a perfect illustration of the challenge facing the UK. There was never the remotest possibility that the plant was in the UK because of what its founder James Dyson, a prominent Brexiteer, called in a letter to the Times, the “outrageous neglect” of science and technology companies.
Only part of the company’s reluctance to manufacture in the UK is due to the recent increase in corporate tax, although the budget increase removes any benefit from research and development tax breaks. It’s also the planning system, the lack of enough trained engineers, the disdain shown for science and technology, and government interference in the way business is run.
Dyson is not happy with plans to make it possible for new employees to request to work from home from day one of their employment, something that is incompatible with the on-the-job learning approach required by a high-end manufacturing business.
The company says the UK will remain a key hub for R&D and will invest £100m in a new technology hub in Bristol for software and AI research. But the idea that Britain can make all the smart, high value-added, brainpower things while other countries do the production is an illusion. Increasingly, Dyson’s R&D is taking place in Singapore, where it has its world headquarters, and in the Philippines.
Dyson is not alone. A report by lobby group Make UK found that six in 10 manufacturers thought the government had never had a long-term vision for manufacturing, while eight in 10 felt that the absence of a strategy put their company in a bind. competitive disadvantage compared to other manufacturing nations.
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Not surprisingly, AstraZeneca recently announced that it was building its new factory in Ireland.
Stephen Phipson, CEO of Make UK, said last week that the US was spending 1.5% of domestic output on the IRA. The equivalent sum in the UK would be £33 billion. However, it is not only the money.
“The lack of a proper and planned industrial strategy is the UK’s Achilles heel,” added Phipson. “Every other major economy, from Germany to China to the US, has a long-term national manufacturing plan, which underscores the importance of an industrial base to the success of their overall economy. The UK is the only country that does not have one. If we want to not only address our regional inequality, but also compete on a global stage, we urgently need a national industrial strategy.”
One option is to treat manufacturing as a niche sector and focus on sectors where it has global influence: financial and business services, for example. In that case, the claim has to stop that leveling up will be achieved by new factories producing top-notch products. The government can make Britain an attractive place for manufacturing companies to invest or it can decide not to compete. Judging by his actions rather than his rhetoric, he seems to have chosen the latter option.
Haldane, Dyson, and Phipson are right. There is no plan and there is no strategy. There’s only industrial strength shit.
