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The Industrial Strategy – one week on

04 Dec 2017

As the dust settles from the release of the Government’s Industrial Strategy, James Tooze reviews what the paper means for science and engineering in the UK.

While a certain royal engagement rather stole Greg Clark’s limelight last week, the publication of the Government’s Industrial Strategy deserves our attention. The foreword from the Prime Minister contains five paragraphs, the second of which sets out her reasoning for kicking off the development of an Industrial Strategy on day one of her occupancy of No 10 saying:

“For me it is not enough to see growth in the national economy if your local economy is shrinking. It is not ambitious enough to have record jobs growth, unless those jobs are secure and delivering real growth in wages. And we are not fulfilling Britain’s potential if, despite having scientists and universities renowned the world over, we cannot turn their ideas into the products and services on which the industries of the future will be built.”

There’s no arguing that science is being put front and centre. Equally it is clear that the Prime Minister wants to see Britain increase its return on the UK research base, as well as wanting to see more of Britain benefiting. These ambitions are set in the context of the Government’s aspiration of improving productivity thus improving the UK economy.

But is the Industrial Strategy up to the job? Will it deliver on the Government’s ambitions? Will the Industrial Strategy have the longevity, and continued drive, that have failed previous strategies? Perhaps aware of some of these lurking concerns, the Business Secretary stated in his announcement that the strategy must “stand the test of time”.

Here we provide a brief breakdown of the headline announcements and then discuss some key areas for science and engineering in a bit more depth, including R&D funding and skills. This will by no means provide a cover-all summary for the entire strategy, and we will continue to explore the publication in detail over the coming weeks.

What is the Industrial Strategy all about?

The Government describes the Industrial Strategy as setting out “how we are building a Britain fit for the future – how we will help businesses create better, higher-paying jobs in every part of the UK with investment in the skills, industries and infrastructure of the future.” They go on to identify five foundations to boost the productivity and earning power of the UK workforce, which are “the essential attributes of every successful economy”. These five areas are:

  • Ideas (R&D, innovation)
  • People (skills and education)
  • Infrastructure (broadband, energy, transport)
  • Business environment (support for specific sectors, SMEs, and access to finance)
  • Places (tackling regional disparities)

Read our digest for a more detailed analysis of the announcements in each of these five areas.

The government has also (so far) identified four Grand Challenges that sit in a layer across the five foundations. These are global trends that will shape our rapidly changing future and which the UK must embrace to “take advantage of global changes, improve people’s lives and the country’s productivity.”  The Grand Challenges are:

  • Artificial intelligence & data economy – aiming to put the UK at the forefront of the artificial intelligence and data revolution
  • Clean growth – maximising the advantages for UK industry from the global shift to clean growth
  • Ageing society – harnessing the power of innovation to help meet the needs of an ageing society
  • Future of mobility – aiming to become a world leader in the way people, goods and services move

The Industrial Strategy has also set out four sector deals; for life sciences, construction, artificial intelligence and automotive sectors. These are due to be the first set of sector strategies, with more to follow, with the focus on sectors experiencing rapid growth and using technologies of the future.

R&D funding announcements

Arguably, the science and engineering sector has fared well in terms of increased funding from the UK Government. Following the £4.7bn over 5 years (up to 2020/21) committed to R&D in last year’s Autumn Statement, last week’s Autumn Budget pledged a further £2.3bn, extending that commitment (plus a bit) for 2021/22. This means an additional £7bn spread over six years will be available to support UK R&D, on top of the baseline current amount (roughly £9.5bn a year) across Government. This is significant funding. And we know that Government loves to make grand-sounding announcements regularly, but for stability we want to see this solid commitment to funding R&D set out as a new baseline, rather than lump sum, year-by-year reannouncements confirming maintenance of the existing level of funding. We have done a bit of an explainer showing the public R&D figures following the 2017 Autumn Budget, and will be taking a closer look (and aiming to fill in some of the gaps) at what the £7bn over 6 years is earmarked for. For now, here are the known commitments set out in the Industrial Strategy.

R&D funding announcements in Industrial StrategyAmount pledged (£m)Time period
Industrial Strategy Challenge Fund725By 2020/21
Investment in world-class talent300By 2020/21
Increasing Research Council budgets600 (estimation)By 2019/20
Increase in responsive grants from Innovate UK44Over 2017/18
Proposed Strategic Priorities fundTBC
Increase in Higher Education Innovation Fund40Per year, reaching £250m in 2020/21
Increased QR fundingTBC
Interim Catapult funding178Over 2017/18
Strength in Places Fund110Between 2018 and 2021
Fund for International Collaborations by UKRI110By 2019/20

This table doesn’t include the funding that has already been distributed since last November, which included roughly £1bn in the first round of Industrial Strategy Challenge Funding, and such programmes as the Rutherford Fund. We were pleased to see mention of a future increase to Quality-Related research funding that will be administered by the newly forming Research England, something that we and many others have been calling for to ensure the dual support system (and the otherwise ironically named ‘balanced funding principle’) are maintained. Further details of funding allocated via the Industrial Strategy Challenge Fund can be shown in the table below.

Wave of fundingFunding pledgedFunding focus areasTime period of funding
Wave 1£1billonHealthcare and medicineRobotics and artificial intelligenceBatteries for clean and flexible energy storageSelf-driving vehiclesManufacturing and materials of the futureSatellites and space technologyUntil April 2021
Wave 2£750millionClean Growth (transforming construction, energy and food)AI and data (Play a major role in immersive technologies and services)Ageing Society (Data for early diagnosis and precision medicine, and researching healthy ageing)Until April 2021
Wave 3To be announced next yearTo be announced next yearTBA

One of the core asks from CaSE since the announcement of the additional funding has been that we want to see UKRI setting up transparent and trusted mechanisms for related decisions and delivery. This must include funding for tried and tested routes with capacity for growth, such as QR, response mode funding, HEIF and Research Council budgets, as well as newer types or modes of funding.

It was interesting to see an increase in R&D tax credits. This is something that is of course welcomed by businesses as it provides them tax relief, but the evidence to link it to incentivising R&D investment, or indeed its relative merit when compared with direct funding is not clear. The announcement of measures linked to the patient capital review (set out in this HMT briefing) look promising including a new £2.5bn investment fund incubated in the British Business Bank and changes announced to investment schemes incentivising investment in knowledge-intensive companies.

There was also an interesting announcement of funding for a Regulators’ Pioneer Fund. In line with the ambition for Brexit to deliver greater capacity for the UK to develop innovative approaches to regulation of emerging technologies, the industrial strategy announced this fund offering £10m to support UK regulators. As we’ve stated previously, this is certainly something the UK could and should look to develop and, in order to do so, the first priority should be to prioritise stability and harmonisation of regulations and standards so that there is a sturdy platform to build on.

Skills announcements in the Industrial Strategy

Within the section on ‘people’, the Government has identified that it is crucial to address skills shortages in STEM occupations, including upskilling the workforce as technology develops and changes. The long-awaited Careers Strategy has finally been published today, so do watch this space for our digest of the key elements within that. However, from the Industrial Strategy, the range of announcements on skills more broadly, as well as measures specific to STEM, are set out below.

The Industrial Strategy headline investment in this area is the pledge of an additional £406m of investment in maths, digital and technical education, which includes most of the above table (except the T-level funding and AI and construction training schemes). There’s still a bit more info needed in terms of timelines for funding and what is lump sum and what is annual. There are some promising proposals in there including a Teacher Development Premium Fund to promote the professional development of teachers in regions of the UK that have fallen behind national teaching standards. Statistics have shown that barriers to CPD access make STEM teachers more likely to leave the profession, and that students in areas that have ‘fallen behind’ (to use industrial strategy language) are less likely to benefit from specialist science teachers, so this fund could help to support teachers in such areas.  There is a lot of work (and funding) still needed if these aspirations are to be turned into lasting benefit, particularly in technical education.

Education funding allocations as outlined in the Industrial StrategyAmount pledged (£m)Time period
Pilot a Teacher Development Premium for CPD42TBC
Establishing Further Education Centres of Excellence40TBC
Expansion of Teaching for Mastery maths programme27By 2023
To improve the teaching of computing & drive participation84By 2023
Funding per school delivering specialist maths school model0.35Annual fund
Pilot to improve post-16 basic maths outcomes8.5TBC
A new Institute of Coding20TBC
For use in T-level courses500Annually by 2022
For Opportunity Areas programme72TBC
Pilot for National Retraining Scheme in re-skilling adult workforce40TBC
Test the use of AI and innovative education technology in online digital skills30TBC
To expand innovative construction training schemes across the country34TBC
To support apprenticeships in disadvantaged areas60TBC

Where we feel improvements can be made

Drawing on calls that we made earlier this year in response to the Industrial Strategy green paper, there are a number of areas in which we feel the Industrial Strategy needs to still work on in the months ahead.

On accountability:

The Industrial Strategy, to its credit, attempts to reflect on the limitations of previous science and innovation strategies (no fewer than twenty!) and improve on the varied success of previous work. The Government has concluded that it wants to engage business, universities, local government and many others in order to successfully implement the Industrial Strategy. This acknowledgement of the importance of continual dialogue will no doubt help the longevity of the strategy, but it is important that the Government takes responsibility to deliver and evaluate this modern Industrial Strategy.

The newly formed Economy and Industrial Strategy Cabinet Committee has been designated to remain responsible for the vision of the Industrial Strategy, which is a good start. What the strategy does do is announce that there is to be an independent Industrial Strategy Council to monitor and evaluate the Industrial Strategy, so we wait for definitive news as to the nature of this council and their remit and powers. This council must be afforded the power, and the teeth, to publicly hold Government to account for the delivery of the strategy. The difficulty in doing this however includes the fact that the strategy has so far not really set out what success would look like in terms of any concrete, measurable outcomes. If this is to be a genuine long term strategy, this must be addressed by Government publishing the set of measures or metrics success (with timelines, interim milestones, and plans to evaluate progress) will be measured against in each area, with clear identification of who will be accountable for each.

As well as success measures, the Industrial Strategy does seem a bit light on setting out how different bits of government will work together in implementing many of the plans set out, and what are the levers where responsibility is across departments. A successful Industrial Strategy will no doubt require cross-departmental work to drive and deliver the strategy’s goals. These arrangements may well have been made within Whitehall, but these frameworks have not been described in the Industrial Strategy.

This will be essential if this Industrial Strategy is to weather political storms. As we have seen over the last 18 months, political climates can change overnight. Without rigorous structures of responsibility and accountability, an Industrial Strategy can be dropped as quickly as a Prime Minister can call an election….

On migration:

The Industrial Strategy pays very little attention to the value of migrants and migration on science and engineering in the UK. We had hoped that as part of a modern Industrial Strategy, the Government would at the lease set out their ambition for developing a confident, positive, evidence informed approach to immigration that supports the wider aims of the strategy. Although equipping and upskilling the domestic workforce for the needs of UK companies is a major part of addressing skills shortages, immigration will have an important and continued role in ensuring science and engineering in the UK can thrive.

The strategy makes reference to the work that the Migration Advisory Committee (MAC) are carrying out on behalf of the Government, and seems to be awaiting the recommendations that the MAC will provide. Although we did not expect the Industrial Strategy to shed light on any future migration system the UK will develop, we do believe that this was an opportunity to highlight the value and contribution of migrants to productivity and the UK economy.

On gaps in R&D funding allocations:

We are pleased, of course, by the pledges to increase investment in R&D by the Government, as outlined over the last year. The Industrial Strategy also outlines plans to develop a roadmap with private businesses to reach the Government’s target of investing 2.4% of GDP on R&D by 2027, which we have continually called for. Although the strategy sheds light on some of the ways in which this extra £7bn will be invested before 2022, our sums show that there is a large hole in the funding landscape. In addition to the Challenge Funds, the Industrial Strategy describes the importance of continuing to fund curiosity-driven research that is fundamental to R&D.

We are eagerly awaiting more detail on how much of an increase quality-related funding, as it is imperative that future R&D investment be allocated in a way that recognises excellence and builds future capacity for excellence. In line with our Vision & Priorities document, we believe that QR should be increased in proportion with research council funding to maintain balanced funding.

What is next for CaSE and the Industrial Strategy?

CaSE will continue to scrutinise funding and policies that impact on the environment for science and engineering in the UK. As part of that we will seek to hold the Government accountable for the delivery of the Industrial Strategy so that the aspirational aims it contains are realised. And we see our role as remaining vigilant to ensure that in the drive to further develop the UK’s innovation strengths we continue to strengthen the UK’s world-beating research base on which our innovation capacity will be built. But the Industrial Strategy suggests the Government understands the importance of strengthening the ‘foundations’, so we look forward to continuing to work with government, Parliament, our members and the wider science and engineering community to strengthen the environment for science and engineering in the UK.