Industrial strategy: taking back control
Intervention alone will not be enough
Craig Berry and Richard Jones
For a long time, industrial strategy was something that belonged in the 1970s, along with British Leyland and cars with square steering wheels. But after the decade of stagnation that followed the 2008 financial crisis, the idea that our economy might need some strategic direction no longer seems far-fetched.
The post-crisis governments led by Gordon Brown and David Cameron experimented with industrial policy. But it is Brexit, like it or not, that has reinvigorated the drive to make Britain more productive. Upon becoming prime minister, Theresa May (who backed Vince Cable’s attempt to revive industrial policy in the coalition era) made the formation of an industrial strategy one of the key pillars of her economic programme.
But leaving the EU does not make industrial strategy any easier, and those who suggest that state aid rules prohibit the UK from doing industrial policy are wrong. In fact, we will need to recreate the EU’s state aid regime domestically if we are to protect industrial strategy from capture by powerful private incumbents. And while the immediate impact of leaving the single market will be felt in the City, it will also jeopardise the ability of firms and industries in all parts of the country to participate in transnational production networks. Thinking only of the finished goods that Britain exports to the continent overlooks the reality of modern industrial development.