**London**: As businesses express disquiet over Rishi Sunak’s government and its economic direction, industry leaders call for a clearer industrial strategy. AstraZeneca’s expansion withdrawal exemplifies growing concerns, while Labour’s proposed plans aim to foster growth in clean energy and advanced manufacturing amidst a backdrop of competing interests.
In the realm of UK business and economic policy, recent events have showcased a shift in sentiment towards the government, particularly concerning its industrial strategy. Previously, during the lead-up to the general election last summer, a number of businesses were eager to align themselves with Labour leader Keir Starmer and Shadow Chancellor Rachel Reeves. However, as of February, there is a palpable sense of disquiet among these same businesses regarding the direction under Prime Minister Rishi Sunak and Chancellor of the Exchequer Jeremy Hunt.
The Autumn Budget, presented in November, sparked a significant backlash from the business community due to its proposals for tax increases and elevated borrowing. Since then, a series of proposed “reset” speeches from the government have attempted, yet struggled, to rehabilitate its image and improve relations with key economic sectors. Notably, AstraZeneca’s recent decision to withdraw plans for a substantial expansion of its vaccine manufacturing facility in Merseyside has added to the growing list of concerns. Additionally, the Bank of England’s gloomy growth projections further highlight the challenges faced by a government still trying to define its economic vision.
Industry observers argue that a cohesive industrial strategy is necessary for businesses to understand how various government policies can harmonise to foster growth. Currently, the government’s approach seems convoluted, encompassing a mix of nationalised rail policies and NHS privatisation, alongside deregulation efforts and commitments to workers’ rights. Amidst a backdrop of impending oil field approvals juxtaposed with declarations of becoming a clean energy superpower, clarity is essential for businesses attempting to navigate these mixed signals.
Labour’s proposed industrial strategy has been posited as a cornerstone of its economic growth agenda. This approach aims to draw inspiration from international models, notably those like Bidenomics, placing emphasis on sector-specific deals. However, there are concerns that such an emphasis on sector deals could lead to inefficiencies and a misalignment of resources, should government interventions extend into areas where private sector solutions might suffice. Currently, industrial strategy appears to be the only well-developed aspect of Labour’s economic policy, heightening competition amongst businesses keen to engage with the government’s plans.
Further complicating matters is the inherent selectivity required within an effective industrial strategy. While government documents articulate ambitious objectives—such as achieving net zero, promoting regional growth, and ensuring economic security—the pathways for the selected growth sectors to meet these objectives remain elusive. The sectors outlined in current strategic plans represent a substantial fraction of the UK’s GDP, yet achieving consensus and effectively managing investments across such a diverse range of interests could prove challenging.
A recent report by Public First has sought to address these complexities by convening various trade bodies to advocate for a clearer, actionable industrial strategy. The report outlines pragmatic steps necessary for the strategy to be operationally successful and highlights the importance of prioritising sectors like clean energy and advanced manufacturing, which are not only economically valuable but also directly aligned with the government’s overarching goals.
Chancellor Hunt has previously noted that “net zero is the industrial opportunity of the 21st century,” underscoring the need for a sharper focus on sectors that can effectively contribute to the goals of sustainable growth. The government’s green paper acknowledges the potential benefits of directing resources towards clean energy and advanced manufacturing, which are pivotal in driving the transition to a sustainable economy. Furthermore, a strategic focus on regional growth could prove beneficial, particularly in areas such as the north-west, which have shown potential for advancement in these sectors.
However, the risk remains that a disproportionate allocation of resources will favour the more prosperous south-east, as exemplified by recent expansions in regional infrastructure. A misallocation of investment could detract from the stated objectives of balanced regional growth and undermine support for the government’s industrial strategy.
Ultimately, for Labour to effectively manage its economic strategy, it must reconcile the diverse interests within its industrial approach while ensuring a clear and decisive vision. An industrial strategy with a robust emphasis on clean energy and advanced manufacturing could not only help facilitate economic growth but also demonstrate tangible benefits to the electorate, including lower energy costs, improved job opportunities, and greater regional equality. As Labour navigates these challenges, clarity, selectivity, and commitment to defined objectives will be critical to crafting a successful economic landscape in the UK.
Source: Noah Wire Services
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