What is the place of ‘places’ in UK Industrial Strategy?

Posted in: Brexit, Business and the labour market, UK politics

Dr Felicia Fai is Associate Professor of International Business and Innovation at the University of Bath's School of Management. This post draws on her newly-published policy brief Place-Based Perspectives on the UK Industrial Strategy, which she edited as part of her IPR Sabbatical.

The UK government has made ‘places’ one of its five foundations of productivity in its White Paper Industrial Strategy: building a Britain fit for the future, released on 27 November 2017. My colleagues in regional economic studies from a number of UK universities and I undertook a critical review of the strategy from the perspective of different levels of ‘place’ in the UK. In our policy brief Place-Based Perspectives on the UK Industrial Strategy we welcome the government’s new emphasis on ‘places’, but we argue that it should become even more central to the strategy if UK productivity and prosperity are to be improved. Moreover, the manner in which the strategy focuses its place-based efforts could potentially increase the regional inequalities in prosperity across the nation rather than reducing them.

Brexit threatens to bring relative economic decline or, at best, stagnation in the short term. Despite high employment, declining real wages, weak export performance and low business investment means the UK suffers from low rates of economic growth and poor productivity relative to its major competitors. The UK should not seek a reputation as a low-cost, deregulated low-tax location conveniently situated between the American and European continents to retain its trade and investment ties - or to create new ones. In the medium- to long-term future, the economic profile and structure of the UK must change to enable the country to develop strong industrial innovation and capabilities that will enable it to compete on the global stage. Only in this way can the UK hope to retain its attractiveness to high-value industries from other nations as a trading partner and investment location. This means generating a labour force with better skills, so that we create and attract both better and better-paid jobs in industries with significant growth trajectories. This is one objective of the industrial strategy.

At the same time, the UK ranks as one of most unequal countries in terms of the distribution of wealth and prosperity. The government seeks to address this issue through its industrial strategy too. Statements of intent to improve basic provision in each area - such as transport and communication infrastructures, skills and education for all, more and improved housing, as well as commitments to environmental standards and green growth, within the strategy attest to this objective. However, there is an unanswered question as to whether the government seeks to raise both productivity and prosperity in every place. For some areas, one objective is more achievable or desirable than the other: a focus on decent jobs in what some have called the "foundation economy" will be more appropriate in particular post-industrial local economies than attracting high value added investment.  Not every region in the UK has an industrial base for productivity improvement; these tend to be established in cities, city-regions or sectoral clusters. These are differentiated by historical evolution, size, activities, competences and resources. All regions have prosperous and poverty-stricken areas, but the balance (and antecedent causes of these) will differ significantly within their geographic boundaries. The UK government at Whitehall cannot begin to understand these differences in every areas or how to address them. There is a need for further devolved power from Whitehall to the regions  or sub-regions to deliver the place-based elements of the industrial strategy.

The new policy brief draws on the expert opinions of scholars in regional economic studies, who address the current state of devolution for the devolved administrations, the meso-level Midlands Engine initiative, mayoral combined authorities and Local Economic Partnerships. It also considers the meaning of place from a firm-level perspective, something hitherto not much considered in policy circles. This multiple layering of different units of place is not an easy terrain to navigate, and among our recommendations we suggest that the government sets out a desired settlement or end state regarding the relative roles and responsibilities of the various units of place, from local to national. Such a measure would assist with the creation and delivery of projects, and stop the wasteful duplication of efforts.

We argue there is insufficient devolution of power at every level, and the impact of Brexit on the devolution agenda has not been inadequately considered; it has effectively stalled devolution altogether. The media has reported on this in recent days, with a particular focus on the concerns of the devolved administrations and Westminster's apparent ‘power-grab’ as powers return from the EU to UK. The mayoral combined authorities too have been seeking to influence government over Brexit and flag up their need for more powers and resources to deliver locally appropriate programmes for growth and prosperity. The Midlands Engine, whilst having the appearance of being a devolved initiative, is actually an agent for the delivery of centrally devised industrial strategy. Local Enterprise Partnerships feel less able to create ambitious targets for locally based growth relative to the mayoral combined authorities because of their lack of powers and funding. The Industrial Strategy also resonates little with those regions that are not city-based or centred on sectoral clusters identified in it. We make recommendations to government on ways to address each of these issues.

In sum, we advocate the further devolution of powers from Whitehall but we also caution that this has to involve not just a deepening or broadening of powers to regions which already possess them, but that it must also include the establishment of more devolved regions or sub-regions. If not, we risk perpetuating regional economic disparities in productivity and prosperity in the UK, albeit along different dimensions to those currently identified. The government needs to renew the momentum towards devolution in the UK and fully integrate place into its industrial strategy. This is the only way that the UK can prepare for a new relationship with the EU and the wider global economy in future.

You can read Dr Fai's policy brief in full here.

Posted in: Brexit, Business and the labour market, UK politics


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