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An Industrial Strategy is Key to Unlocking Strong and Sustainable Economic Growth

industrial strategy
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Sarah Olney MP

Liberal Democrat Spokesperson for Treasury and Business

Sarah Olney MP sets out the Liberal Democrat’s plan for an ambitious industrial strategy that places Net Zero at its core.

After years of stagnating growth and in the face of a weak economic outlook, it’s clear the Government’s current approach to economic management is not working.

Businesses across the breadth of the UK economy consistently lament the Government’s chopping and changing on policy and lack of cohesive strategy as barriers to attracting investment and making long-term plans for growth.

If the UK is to remain competitive on the international stage and adapt to the demands of a modern economy, we urgently need to restore business confidence and boost investment in growth industries. At the heart of the Liberal Democrat plan to achieve this is an ambitious industrial strategy.

Politicians, business leaders, and policymakers often talk about the importance of an industrial strategy for economic success, but what exactly does this look like in practice?

Liberal Democrat Approach to Industrial Strategy

The Liberal Democrat vision for an industrial strategy is a purpose-driven partnership between government and business that aims to tackle the great economic and societal challenges of our time. It is a single document that would set key objectives for industry – such as supercharging green technologies; creating good, local jobs; and boosting international trade. It would also ensure that policies in key areas work in tandem: whether in research and development, skills, or tax.

And there has never been a greater need for coordinated action, due to the wealth of generational challenges facing our country, including the legacy of the COVID-19 pandemic, the climate emergency, the energy crisis, the Government’s failed deal with Europe, and declining economic growth.

Other major economies clearly understand the scale of these challenges and have developed industrial policy in response. With the Inflation Reduction Act, the US wants to revolutionise its green industries, boost growth and cut emissions. And Europe is already responding with its own Green Deal Industrial Plan.

In contrast, the Conservative Government dropped the UK industrial strategy in 2021. Then-Business Secretary Kwasi Kwarteng dismissed the strategy that had been developed under Theresa May as “pudding without a theme” – a sentiment that is not shared by many across industry. Make UK – the manufacturer’s organisation – report that 87 per cent of manufacturers say they are at a disadvantage to their international counterparts due to a lack of UK industrial strategy.

Importance of Industrial Strategy for Achieving Net Zero

A bold, comprehensive industrial strategy aligned to Net Zero goals is a vital tool for tackling the climate emergency, whilst supporting businesses to adapt and thrive.

The Prime Minister’s recent decision to row back on crucial green commitments is a perfect example of the instability that ensues in the absence of a long-term, strategic approach. Many businesses saw carefully crafted plans drawn up around the existing targets thrown into the air overnight. Far from showing leadership, this is putting the UK at the back of the queue as the rest of the world races to embrace the industries of tomorrow.

The UK needs a bold green agenda that provides certainty to businesses on climate commitments and gives the private sector clear investment signals.

An industrial strategy should introduce effective incentives for green investment and leverage technology to supercharge the green economy. This should also be backed up with a plan for investment in key infrastructure, covering areas including rail, building insulation, the national grid, and EV charging.

Investment in Skills

An industrial strategy must also support investment in the skills of tomorrow and tackle the chronic skills and labour shortages that are holding back our economy.

Key to a Liberal Democrat approach would be replacing the broken apprenticeship levy with a broader and more flexible skills and training levy. This would allow employers to adapt training plans to best suit their business model and support the uptake of apprentices as well as the upskilling of existing staff members.

Ministers should also scrap the insultingly low ‘apprentices wage’, which at just £5.28 an hour is nearly half the national living wage. Not only is this a huge injustice – especially for young people – it’s exactly the wrong incentive when we’re looking to fix skills shortages.

The Need for Stability

Above all, an industrial strategy would provide stability.

It is a long-term plan that transcends parliaments, overcoming the short-termism that has dominated the policy landscape in recent years.

We must also ensure the industrial strategy is protected from chop-and-change by reinstating the independent Industrial Strategy Council and putting it on a statutory footing. This body would ensure vital oversight, monitoring, and evaluation of the industrial strategy for the long term. Liberal Democrats also support giving the Cabinet Office more powers to coordinate and implement industrial strategy when cross-cutting policies are involved.

It’s important to remember that an industrial strategy is not just a tool to enable businesses to achieve their goals and boost profits.

An industrial strategy is essential for delivering long-term prosperity for individuals through supporting strong and sustainable economic growth. This will in turn create good jobs, fund vital public services and build strong communities.

Voices across industry are united in the need for a pragmatic, comprehensive strategy, and it’s high time the UK Government finally listens. 

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