Industrial strategy success: it all depends on a trade deal

Released earlier this week, the Government’s ambitious industrial strategy addresses the long-term challenges facing the UK economy, setting out the steps needed to close the productivity gap and better compete with rival manufacturing nations. While the aims, which focus on disruptive technologies and increased collaboration with industry, education and the public sector, certainly mark a positive step forwards, the Government risks effectively putting the brakes on progress altogether unless a satisfactory Brexit trade agreement is achieved without further delay.

What are critics of the industrial strategy saying?

Much of the criticism around the industrial strategy has been that funding initiatives, such as the pledge to raise total R&D investment to 2.4 per cent of GDP by 2027, are not enough to support the Government’s aim of transforming the UK into a world-leading industrial nation. While businesses will welcome this increased investment, it is important to bear in mind that this still falls far behind countries such as Germany and the US. Further investment, particularly in infrastructure, is still required to ensure the UK gets ahead of the curve.

Similarly, the Government’s commitment to investing £406 million in maths, digital and technical education seems inadequate given the urgent need to address the UK’s STEM skills gap.

manufacturing diagramRapid developments in emerging technologies such as artificial intelligence (AI) and additive manufacturing over the coming years will mean that 60-80 per cent of the jobs due to be occupied by those currently of primary school age have not yet been created. As such, it is essential to bolster the home-grown manufacturing skills base by facilitating better collaboration between manufacturers and schools, and instilling a passion for STEM subjects at an early age. The success of these initiatives relies on encouraging their takeup and ensuring that they are delivered in an efficient manner which is not perceived as onerous by education institutions.

The fact that 11 per cent of the UK’s manufacturing workforce is made up of EU nationals makes the need to foster internal specialists even more pressing. Greater clarity with regards to the position of EU workers and a skills-based visa system, allowing international industry leaders to enter the UK to train inventors of the future, would also help in mitigating the effect of Brexit on manufacturers.

Aligning the UK’s productivity levels with those of its global competitors is highly important and it is vital that businesses utilise disruptive technologies to digitalise lower-skilled jobs, whilst training staff to deal with the new challenges that such technologies will inevitably introduce.

And Brexit?

Caroline Milton - Menzies AccountantWith this week bringing the news that the UK has offered the EU a divorce bill of circa £44 billion (notably over 100 times the amount to be invested in STEM education as part of the industrial strategy), many will be hoping that attention can now be turned to trade. Aside from the fact that the EU is the destination for the majority (44 per cent) of UK exports, it is also in the interests of the rest of Europe that a trade agreement is settled on in good time. For example, as the biggest importer of cars from Germany, the UK is an incredibly important to the country’s automotive sector. It is encouraging to note that the Government are pushing forward on proposals for autonomous vehicles to be on the road by 2021, which are clearly aimed at further supporting this important sector, and will enable the UK to continue to attact foreign investment both pre and post-Brexit.

If handled well, Brexit offers the potential for the UK to increase its global competitiveness. Better access to Commonwealth countries, in particular growth nations such as India and Pakistan, would result in more competitive import prices, helping to keep inflation low.

However, in order for such advantages to be realised, it is essential that the Government stops burying its head in the sand and addresses these funding challenges. Similarly, while the targets set out in the industrial strategy appear promising on paper, they are irrelevant unless a mutually-beneficial trade deal provides sufficient structures and investment to drive them through.

For more information on the impact of the new industry strategy on the manufacturing sector contact Menzies Manufacturing Partner Caroline Milton by email at or by phone on 01372 366173.

Find out more about Menzies Manufacturing sector advisory services. 

Posted in Blog, Manufacturing