Sector Deals: a way forwards or a step back?
A key plank of the Industrial Strategy is the Government’s visions for “sector deals”, where industry comes to Government with proposals to address the challenges of their sector via de-regulation, directing policy efforts, creating new institutions or promoting the sector abroad.
A key plank of the Industrial Strategy is the Government’s visions for “sector deals”, where industry comes to Government with proposals to address the challenges of their sector via de-regulation, directing policy efforts, creating new institutions or promoting the sector abroad. Sectors identified as being at the front of the queue include life sciences, ultra low emission vehicles, industrial digitalisation, nuclear and the creative industries. Industry bodies in the oil & gas, heritage, construction and property sectors have also suggested they may throw their hat into the ring.
This element of the strategy has attracted criticism from business (“In what circumstances [can] the Government pick winners that private investors aren’t picking?”, Sir Philip Hampton, writing in the FT) and from Parliament, where the Business, Energy and Industrial Strategy Committee has urged the Government “to reconsider giving sectoral strategies priority and instead focus on horizontal policies and specific ‘missions’”.
The Green Paper cites aerospace and automotive as examples of sectors which long-term Government support has had a positive impact. However, the Committee heard evidence that in other cases efforts targeted at specific sectors had not always delivered results, and identified a high risk of capture by private lobbying interests. It also criticised the lack of transparency around how the industries mentioned in the Green Paper had been chosen.
Sector deals have also attracted support, with the CBI, EEF (the manufacturers’ organisation) and Institute of Directors all backing the idea of targeted interventions in particular sectors. Writing prior to the publication of the strategy, the Institute of Directors noted the success of support for the tech and life sciences sectors: “This is a strategy not centred on ‘picking winners’ in the traditional sense, but rather on the government championing new, innovative industries through vocal support, tax incentives for investors, research funding, and a hands off regulatory approach”. Others have welcomed the concept but complained that the industries identified are too safe; they are already comparatively well established and productive.
An approach which relies on industry approaching Government will surely favour those sectors that are well organised and inter-connected. How will sectors with large numbers of smaller participants, or newer sectors which lack established institutions and co-ordinating bodies, put together proposals for a co-ordinated approach to Government? If the Government is going to pursue deeper sector interventions, shouldn’t it be bolder still and actively identify sectors in their infancy which need help to come together? The most innovative sectors with the greatest capacity to boost our economy in the future may not be the ones who are best equipped to lobby Government. If the Government is going to wait for sectors to approach them, then the issue of transparency becomes critical; for a young sector to invest resources in formulating a proposal, they will need clarity on what the criteria are for a sector deal to be approved.
The Business, Energy and Industrial Strategy Committee favoured a different approach altogether – starting with problems, not sectors. For example, the Government could focus on “decarbonising our energy intensive industries” rather than a sector deal for ultra-low emission vehicles.
Despite the reservations from various quarters, at the moment it seems to be full speed ahead with sector deals. The next few months and years will show how enthusiastically they are embraced by industry and with what success.