Last month, the Government published an eagerly awaited document, ‘The UK’s Modern Industrial Strategy’. When the Prime Minister addressed the International Investment Summit last October, he was keen to dispel any idea that the strategy would be like previous industrial strategies:
We’re not in the business of individually picking winners. But we are in the business of building on our strengths.
That message seems to have fallen by the wayside. The Modern Industrial Strategy commits the Government to ‘backing eight sectors with the highest potential, and the frontier industries at their leading edge’ and ‘play[ing] a strategic, active role beyond supporting the fundamentals of rule of law and macroeconomic stability’. No doubt ministers will say they are favouring sectors rather than individual companies, but the track record of state intervention is no better under that definition.
Industrial strategies have tended to result in subsidising uneconomic enterprises which continued to flounder in state hands: British Steel, British Leyland, British Aerospace, British Shipbuilders. Not only did the state fail to pick winners, it came to entrench outdated and uncompetitive practices and discourage innovation. It should have been obvious that this would happen, because its fundamental motivation was to shore up existing industries on the assumption that what had been dominant companies and sectors would – and should – remain so.
This remains a powerful element in the Government’s economic and industrial policy. The Business and Trade Secretary, Jonathan Reynolds, announced last September that Tata Steel would receive £500 million in taxpayers’ money to help convert its Port Talbot steelworks from old-fashioned blast furnaces to a more modern electric arc furnace. He was backing not just a sector but an individual company, and his justification for handing it half a billion pounds was pure industrial nostalgia: ‘Port Talbot has always been and will always be a steelmaking town.’
No one seemed to ask the question ‘why?’ Why would steel always be the primary industry of Port Talbot? By what economic rule? A moment’s thought would have revealed that this always-and-forever attitude was a nonsense doctrine, and a barrier to progress.
It is not just ministers who want to maintain what has been, despite its impossibility. Emma Bridgewater, the ceramicist and entrepreneur, was recently interviewed in The Daily Telegraph. Speaking passionately about the roots of her sector in Staffordshire, her focus was preservation of what has been.
‘It matters so much to me to keep this industry going,’ she said, ‘and the tradition of all those skills. There’s nothing sadder than a closed factory.’
But this isn’t how economies work. When Josiah Wedgwood was born in 1730, the Staffordshire Potteries were beginning to boom, but it had not always been that way. Pot-making in the home on a small scale had a long history, but it was only when John Astbury began applying the techniques learned from the Dutch Elers brothers to produce redware, and then after 1720 adding ground flint powder to the local clay to produce creamware, that Staffordshire pottery achieved real commercial dominance.
We could look at Glasgow too. Shipbuilding on the Clyde is seen as emblematic of Britain’s industrial decline: in the early 20th century, between a fifth and a quarter of the world’s ships were produced in Glasgow’s yards, but today only three yards remain active, BAE Systems Maritime’s facilities at Govan and Scotstoun and Ferguson Marine, owned by the Scottish government.
Yet there was a time when these were new industries. Until the early 19th century, shipbuilding in Glasgow was negligible. The River Clyde was too shallow to allow much maritime construction, but what did power Glasgow’s economy, and see its population explode from around 7,000 in 1600 to 77,000 in 1800, was trade. Imagine if someone had said in 1800 that ‘Glasgow has always been and will always be a tobacco town’. It would have been to close their eyes and stop their ears to the very idea of an industry which would turn it into the ‘second city of the Empire’.
Of course, specialisms can have economic benefits. Success attracts more success, as we can see from Silicon Valley’s tech giants to the jewellers and diamond traders of Hatton Garden. If sectors become totems, if the government starts to protect them because they have ‘always’ been there, then innovation and progress have been turned away at the door. Technology, demographics, wages and markets all change, and cannot be defied. Sunderland was not ‘always’ a car manufacturing town, nor Dundee a world leader in computer games.
Britain has a long history of clinging to outdated industries for too long and trying to maintain sectors in which it cannot compete. While policymakers are fighting expensive rearguard actions, they are not re-examining fundamental strengths and capabilities, and helping entrepreneurs find new areas in which to flourish. And it’s all happening again: economic nostalgia which strangles progress.
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