Are local industrial strategies still relevant as we ‘build back better’?
Despite receiving lukewarm support from the current government, the UK’s Industrial Strategy remains an important reference-point for many as our economy suffers from the double-insecurity of approaching Brexit and the Covid-19 pandemic.
An important part of the Strategy has been its local dimension, with Combined Authorities and Local Enterprise Partnerships being tasked in 2017 to develop their own local industrial strategies, in line with overall national Government objectives. Greater Manchester and the Liverpool City Region have recently revisited and adjusted theirs in the light of the Covid-19 crisis.
Did it make sense to embark on local industrial strategies?
Now we have some hindsight, has it made sense to develop different industrial strategies for different places in the UK? What have such strategies focused upon? Have there been challenges to their development and implementation? This is the subject of a new Special Edition of the journal Local Economy edited by Francesca Froy and Andrew Jones.
For Greater Manchester, local industrial strategies require an understanding of ‘what places are currently good at, and what they might be able to become good at in the future’. The strategies have in some cases helped to galvanise local public and private actors around existing strengths (such as advanced materials and health innovation in Greater Manchester; clean energy, low carbon and hydrogen in the Tees Valley; and medical devices and health care technology in the Leeds city region), while allowing a consideration of possible diversification into proximate and viable industries — what would be called in the economic complexity literature, the ‘adjacent possible’.
However, despite their promise, governance problems have hampered the delivery of the local industrial strategies in practice. The need for alignment with national priorities has made it difficult for some areas to make their strategies truly place-specific. The uneven character of the UK’s local governance structures has also meant that some strategies have been developed within fragmented and contested spaces of interaction, characterised by a ‘continual jockeying for power and leadership’.
Can revised local industrial strategies form the basis for ‘building back better’?
It is likely that place-based industrial strategies will become more prevalent internationally in the next few years, as localities and regions try to bounce back from the geographically-specific economic impacts of Covid-19. In the UK a loss of jobs in the country’s more vulnerable regions will make the stated ambition of the UK government to “level up” such areas harder to achieve than ever. In this context, the local industrial strategies could prove invaluable in guiding policy support and reinvestment.
“place-based industrial strategies will become more prevalent internationally in the next few years”
Local policy makers can also harness this period of disruption to consider more profound changes that they would like to see in their local economies. Since its inception the Industrial Strategy has been embedded in a mission-based approach which aims to tilt the playing field so that private sector growth and innovation helps to meet public priorities and tackle societal challenges. When the Industrial Strategy white paper was published in 2017 it explicitly targeted four “Grand Challenge” areas, citing IIPP research and acknowledging that economic growth has not just a rate but also a direction. IIPP hosted the UCL Commission on Mission-Oriented Innovation and Industrial Strategy which worked closely with the government on how such a directed strategy could be implemented.
This aspect of the strategy now chimes well with the renewed appetite for long-term intentional change which has accompanied the Covid-19 pandemic, perhaps best encapsulated by the OECD’s international call to ‘build back better’. There is a growing global demand not just for economic recovery from the effects of the pandemic, but one that encompasses sustainability and climate change mitigation that is so desperately needed to hit the levels of decarbonisation recommended by the IPCC. Such an approach must involve a coordinated approach harnessing policy “levers” and institutions at national and local levels. IIPP has been working, for example, with Greater Manchester to implement a mission-oriented innovation approach to the city-region’s 2038 carbon neutrality challenge.
“There is a growing global demand not just for economic recovery from the effects of the pandemic, but one that encompasses sustainability and climate change mitigation”
The Covid-19 pandemic has also underlined the importance of foundational sectors such as health, care, and basic infrastructure that are so integral to local economies. It is perhaps no surprise that Greater Manchester has given greater priority to these sectors as part of its local industrial strategy rethink. While the local industrial strategies have focused to a large extent on improving growth and productivity, Froud et al argue that a different approach is needed with foundational sectors, which should be supported and rewarded for the social value that they create. This argument resonates with IIPP research on how to define and measure public value.
As more localities and regions revisit their local strategies, ‘building back better’ may require a fundamental rethink in terms of targets and incentives.