Building the foundations

From late 2012 to early 2015, the Coalition Government released a series of Industrial Strategies covering 11 sectors. Whilst they contained some important analysis and some sensible proposals, they felt decidedly low-key – as though the Government at the time were still a little afraid of the stigma of being seen to ‘pick winners’. They were also very much national strategies. Places were mainly acknowledged insofar as they were the site for existing assets or future investments.

The publication of the Industrial Strategy yesterday was very different. The message was that Government - and local governments and LEPs – have a key role to play in supporting the development and growth of new industries and addressing the challenges the UK faces in the 21st Century. In concentrating on five ‘foundations’, the Industrial Strategy has articulated the key elements needed to drive economic growth and has set out to address each of these.

Crucially, one of the five foundations is place, which amongst other things acknowledges that we can’t understand economic activity and growth properly without an understanding of place. The Industrial Strategy recognises the importance of local government and LEPs in ensuring that places function well and provide supportive environments for growth. Specific investments in the Transforming Cities Fund and the announcement in last week’s Budget of the increase in the Housing Infrastructure Fund (HIF) are welcome in this regard.

There remains a lot to be worked out. The Industrial Strategy acknowledges the contribution of over 2,000 responses to the Green Paper earlier in the year, and the influence of many viewpoints shows in the White Paper. There are an awful lot of ideas, and how the Industrial Strategy will work in practice will depend on a stronger articulation of many of these.

Institutions, Councils and Panels

Most obviously the Industrial Strategy makes reference to a plethora of new organisations, councils and advisers. To oversee the Industrial Strategy there will be an independent Industrial Strategy Council, modelled on the example of the Office for Budgetary Responsibility (OBR), which will ‘commission specific evaluation projects as appropriate’ and ‘develop measures to assess and evaluate our Industrial Strategy and make recommendations to the government’. This is welcome news, as a national strategy deserves the resources to ensure that progress is being made. But it begs the question as to how the new Council will work with local government and LEPs who are making these investments.

New Skills Advisory Panels are to be ‘integrated into’ Mayoral Combined Authorities and LEPs. The task of these new Panels will be to ‘produce rigorous analysis of the current and future supply and demand for skills and help areas form a clearer understanding of their skills requirements…[and]…they will have real, meaningful influence over the provision of education and training for those over the age of 16’.

The underlying idea – to ensure that local education and skills provision meets the needs of the economy – is a good one. But the Industrial Strategy leaves to one side how exactly these new bodies are to be integrated into existing Combined Authorities and LEPs, and how much money and influence they will wield. Combined Authorities and LEPs are already keenly aware of the skills challenges in their areas, so it is important that the new Panels bring additional powers and tools for addressing these challenges if they are to have a meaningful impact on outcomes. And it is important that they are genuinely local groups and not simply local outposts of central Government.

Other institutions / organisations referenced in the Industrial Strategy include a new AI Council and a supporting Government Office for AI, a Business Champion for each of the Grand Challenges, and nine regional UK Trade Commissioners, not to mention UK Research & Innovation (UKRI) who will oversee the investments in R&D which feature prominently in the Industrial Strategy.

What role for Local Government and LEPs?

Given all of these new organisations, local government and LEPs could be forgiven for wondering where this leaves them in regards to the Industrial Strategy. Mayoral Combined Authorities have probably fared best in the past week, getting a big chunk of the new Transforming Cities Fund straight off the bat, being well placed to secure further investments in HIF, and with adult education budgets to be devolved to them in 2019.

LEPs also have reason to be pleased with the Industrial Strategy. The Industrial Strategy reaffirms the Government’s commitment to LEPs, puts in place biannual meetings with the Prime Minister and LEP Chairs, and holds out the promise of additional financial support. However, the Industrial Strategy also states that performance between LEPs has been variable, that the geography of some LEPs needs to be reviewed, and that the appropriate structures for ‘holding LEPs to account’ need to be implemented. The Industrial Strategy states that the Government will work with LEPs to ‘set out a more clearly defined set of activities and objectives in early 2018’.

Local authorities outside of Combined Authority areas probably have the most reason to feel slightly neglected, with the place elements of the Industrial Strategy mostly focussed on Mayoral Combined Authorities and LEPs. There are some interesting points in the Industrial Strategy about Town Deals. And it would be wrong to ignore the importance of local authorities within Combined Authorities and LEPs. It is also worth noting that one of the most important local announcements concerned the Cambridge / Milton Keynes / Oxford corridor. Although the Cambridgeshire end of the corridor does have a Mayoral Combined Authority, the rest of the corridor does not. Yet, by agreeing a strong local commitment to housing the corridor authorities have secured significant transport infrastructure investment.

Signalling further devolution

Reinforcing the place-based approach, the Industrial Strategy also signals continued support for devolution. Specifically, it states: ‘we will continue to support locally driven partnerships, proposals and reforms, with the aim of ensuring that economic powers are exercised at the most appropriate level and that decision-making is effective and clear’. This is backed up by continued support for City and Growth deals outside of England, reinforcing the progress which was noted in the Budget around city deals in Stirling, and the Tay cities, and the desire to develop growth / city deals for North Wales, mid-Wales, and Belfast.

As well as local devolution, the Industrial Strategy also continues the Government’s support for regional bodies, powerhouses and corridors. Alongside specific mentions of the Northern Powerhouse and Midlands Engine, there are also references to a strategic corridor spanning North Wales and Cheshire and Warrington, and also to the Great Western Cities of Cardiff, Newport and Bristol. In the South East, the Government is committing to working with the Thames Estuary 2050 Commission to develop a future vision and exploring options for housing deals with local authorities in the Thames Estuary region.

What should places be doing on Local Industrial Strategies?

The White Paper states that the Government will work in partnership with places to develop Local Industrial Strategies that are aligned to the national Strategy. The first of these Local Industrial Strategies will be in place by March 2019, which is a longer time-lag than had been mooted earlier in the year. The fact that these Strategies will be prioritised according to the ‘potential to drive wider regional growth, focusing on clusters of expertise and centres of economic activity’ suggests that there will be waves of ‘deals’. It also suggests that Combined Authorities and LEPs should focus their efforts over the next 12 months on ensuring that they have a strong evidence base on their sectors and growth prospects, in order to be well placed to benefit from the Local Industrial Strategy process (and the UK Shared Prosperity Fund).

Summary: continued opportunity for ambitious places

So, to summarise, there remains a lot of ambiguity as to how all of these proposals will play out in practice, but also a lot of opportunity for local government and LEPs. Fundamentally the Government remains committed to working with places that show an ambitious approach to dealing with the economic and social challenges the UK faces. So, the challenge for local government and LEPs remains the same: to identify the barriers to growth in local areas based on sound evidence, to develop sustainable policy responses, and to work with Government to develop deals based around ambitious but practical approaches to these issues.

We've put together a handy guide to the key points from the Industrial Strategy which you can download here.