The importance of industrial strategy

Speech by Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, to the Institute of Directors annual conference 2016.

Uk from Space (Tim Peake image)

Thank you.

It’s a great pleasure to be here as the first Secretary of State for Business, Energy and Industrial Strategy.

It’s an honour to serve in the role and a privilege to work closely with you as we develop an industrial strategy for the nation.

I’ll say more about that in a minute, but first I’d like to pay tribute to Simon (Walker) for his extraordinary leadership of the Institute of Directors (IoD).

Ahead of the curve on issues like executive pay and governance reform, he has aimed always not just to represent British business, but the best of British business.

He’s also nurtured a new generation of business leaders, making it easier for younger members to join and have their voice heard.

For all these reasons and more, his outstanding leadership is widely appreciated and will be greatly missed.

One of the greatest strengths of our country is that we are a nation of entrepreneurs.

At a time of great change we can be inspired by the fact that more jobs have been created in Britain over most of the last decade than in the rest of Europe put together.

The people who created them are you.

The start-ups, the small and medium sized enterprises, the lynchpins of local economies across the land.

Britain is home to big name global businesses, but just as important – more important for job creation – are the entrepreneurs building businesses far from the spotlight.

Our job creators don’t always get the respect they deserve.

But I believe that this country should be as proud of its entrepreneurs as it is of its Olympians and Paralympians.

Like everyone here I’ve been hugely impressed by the deliberate progress made over the last 20 years.

From 36th place and 1 gold medal in Atlanta to 2nd place and 27 gold medals in Rio.

Now I know that whether in sport or in business, it is the competitors who win the prizes not governments.

But I do think we should be prepared to learn the lessons from the success of following a long-term strategy.

Planning for the long-term is nothing to be embarrassed about.

In any other walk of life, it is essential.

Every business here forms a view of how you are going to earn your living in the future.

I’ve never understood why it has been considered controversial for a government to do the same.

A government that fails to look ahead and make the right long-term decisions on tax, infrastructure, research, education and skills, is one that has abdicated responsibility.

There’s already enough uncertainty in business life without governments adding to it.

And yet an electoral cycle of 5 years; a budget and autumn statement cycle of 6 months; and a media cycle of 24 hours means that too often public policy is set restlessly and is an extra source of risk for business has to take into account.

So an explicit commitment to a sustainable industrial strategy is to aim for stability and predictability.

And to achieve that requires taking not a deliberately partisan approach – always edging for difference and finding something to make others disagree with – but seeking where it is possible to establish common ground.

In my view we have had enough drama in British politics over the last year – I want us to recover our reputation for stability and predictability as a business environment.

Building upon proven strengths is a cornerstone of good strategy.

This country has no shortage of them.

For a start, a powerful record on science and innovation; only America has more of the world’s top universities, Nobel prizes and registered patents.

We excel at the cutting edge of industry.

For instance, our motor industry has the most efficient plants in the world.

A quarter of the satellites launched into orbit today are made – not in Houston or Cape Canaveral – but in Stevenage.

Our professional services – accountancy, law, consulting – our creative industries, many of our technologists – set the global gold standard.

We need to burnish these strengths.

We must provide the research funding to keep us out in front.

We must ensure that land and supporting services are available not just to major employers but also to the increasingly integrated supply chain of smaller, specialist firms.

And we must set the technical and legal standards that create long-term confidence in Britain as a place to do business.

Of course, a modern industrial strategy is as much about potential as it is about existing strength.

Every business here today was a start-up once.

We must never be the protector of incumbency – but instead be constantly looking to create conditions to be open to new competitors and indeed to new industries that may not exist anywhere today but which will shape our lives in the future.

In my view any successful industrial strategy has to be local. Governments are fond of quoting national figures – of economic growth, of productivity, of employment.

But the truth is economic growth does not exist in the abstract. It happens in particular places when a business like yours is set up, or takes on more people, or expands its production. And the places in which you do business are a big part of determining how well you can do.

And they’re very different places.

It’s obvious that South Kensington here has very different needs from Middlesbrough. If you stand at the Pier Head in Liverpool you couldn’t be confused that you were in Manchester – just 35 miles away.

Yet for too long, government policy has treated every place as if they were identical. It seems to me that helping Cornwall make the best of its future is as vital to a comprehensive national success as helping Birmingham – but what is needed in each place is different, and our strategy must reflect that.

Many of the policies and decisions that form our industrial strategy will not be about particular industries or sectors, but will be cross-cutting.

For us to succeed in the future we need to have the right infrastructure – roads, rail, broadband and mobile – that can connect businesses to their workforce.

We need to have a rising generation of young people who are better educated than our competitors – and their predecessors – but also better trained.

In the debate about education we must make sure that vocational education – especially in engineering and technology – plays a much more prominent role in our country than it has for many years now; and that employers have a decisive role in making sure that skills training is meeting the needs they have to fulfil their order books.

We need a tax system that clearly and reliably encourages entrepreneurship and innovation. And a modern system of corporate governance – on which the IoD has been doing important work – that builds widespread confidence in business.

Ladies and gentlemen, the best governments are the ones that sense that the world is changing and that the country has to change too.

I believe we are at such a point in our history today; and not only because of the challenges – and opportunities – that Brexit requires us to confront.

Just as in 1979, the new government knows that Britain needs to change in order to prosper in the years ahead. I think we will look back in the years to come on 2016 as just such a moment.

The challenge facing us is this.

For all the excellence and entrepreneurial brilliance that I have described.

For all the assets and skills and reputation we have as a nation.

For all of the astonishing economic progress we’ve made in this country.

It is visibly uneven. Britain can boast the richest area in northern Europe – central London.

But we also have 9 of the 10 poorest.

These aren’t remote provinces but great cities – a few hours away from where we meet today.

We have some of the most productive businesses in the world but also – compared to competitors like Germany – a disproportionate number of low productivity businesses.

We have people who are the most capable and best trained on the planet. But too many leave school or college without the education and training needed to hold down a job productive enough to support themselves and their family and to pay for a long old age.

We have new infrastructure like Crossrail about to open, but we have roads that are bottlenecked, trains overcrowded and broadband and mobile coverage that is simply unacceptable in 2016.

We have low carbon energy systems that lead the world, but also the failure of successive governments to replace the power stations reaching the end of their lives.

And we have a worldwide reputation for fair dealing, but also examples of behaviour that tarnishes the good name of business.

This is no time to lower our sights or our standards.

This country will never win a race to the bottom.

Looking ahead, it is clear that the only viable path is in the opposite direction.

Across the world and in different industries a big change is taking place.

It used to be the case that products were never as good as the day they were made.

Eventually, they were out of date and replaced by new alternatives. That was true of products, industries, skills.

But we are today entering a world of continual upgrades.

Things can be improved – transformed – to be better than they were before.

Phones, software, industrial processes – and before long almost everything that an advanced economy produces.

I believe that it is time for our country to have an upgrade.

An upgrade in our infrastructure so that we have smart and modern connections – physical and electronic.

An upgrade in our education and training system so that we can benefit from the skilled workforce that we need in the future.

An upgrade in the development and regeneration of those of our towns and cities that have fallen behind the rest of the country.

An upgrade in our standards of corporate governance and in the relationship that government has with businesses of all shapes and sizes.

During the weeks ahead, I and my ministerial team will be travelling to every part of the United Kingdom to ask you to work with us to forge those relationships with you and your colleagues.

I have asked Simon and Stephen to arrange for events to take place in all of your regional branches, so that we can work together on this important mission.

And Simon and Stephen will meet with me frequently so that everyone here can know that whatever your advice or concern you have an open door to me and my colleagues in government.

When Theresa May became Prime Minister she said that she would build an economy that works for everyone.

That ambition can only be achieved by working together with you and your members in every part of the country. I look forward to doing so, and I’m very grateful to you for inviting me here today.

Published 27 September 2016