Today’s FT has an editorial that sets out how Vince Cable is ‘Lifting Britain’ with his industrial strategy. The FT applauds his contribution as promising. The article continues:
It is not quite yet a love affair, but the UK coalition government is definitely flirting with a more activist industrial policy. Ministers think the state’s involvement can assist in rebalancing the economy away from finance and toward manufacturing. They also hope this strategy can boost Britain’s recent growth performance, which at best has been disappointing.
Vince Cable, business secretary, is championing this approach. Last September, the business secretary announced he would identify sectors in which the UK economy had a competitive advantage and set out a strategy in tandem with the industry concerned. The first review, about aerospace, came out this week. The government is committing to spend £1bn in research over the next seven years. The private sector will match it, bringing the total to £2bn.
British cabinets do not have a shining record when it comes to picking winners. The government’s attempts to rescue the British Leyland car company in the 1970s patently failed. Yet, Mr Cable’s agenda – which will soon look at the automotive and the agri-tech industries – shares reassuringly little with that experience.
First, it is aimed at sectors in which the UK has a sound track record and which are expected to grow quickly. Aerospace is a prime example. With a 17 per cent global market share, the UK industry is second only to the US. The sector is predicted to expand as emerging markets demand new aircraft and developed economies replace old ones. It makes sense to build on the existing strengths to capture some of this demand.
Second, the government aims to work with the industry to correct market failures rather than going for full-scale dirigisme. R&D in the aerospace industry is lengthy and highly uncertain. Companies, particularly small suppliers, find it hard to secure funding from commercial investors to keep up in the innovation race. Provided that there is careful monitoring of how the money is spent, the government has a role to play.
No one should expect Mr Cable’s pet project to be a panacea. Britain’s highest-tech sectors face an acute skill shortage. It will take time, resources and a less obstructive immigration policy to solve this. While demand is weak, both at home and globally, even fast-growing sectors such as aerospace will expand a tad more slowly.
But the government should be applauded for setting out a vision of where UK industry is heading. Ensuring it arrives there is the next – and hardest – task.
The link to the full FT article is here