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Effective Policy Approaches to Sectoral Issues

The UK is unlikely to achieve the step change needed to compete globally and smooth the impact of transition between old and new industries without an ambitious, strategic, and far-sighted sectoral strategy.

Two new reports by the Industrial Strategy Council provide an overview of the key aspects of the UK’s sectoral composition, set out principles for successful design and implementation of sectoral policies, and comment on the UK’s current policy framework for sectoral intervention. The key findings include:

  • Appropriate targeted policy is needed to facilitate a smooth transition to a post-Covid-19 reality, but also to maintain the long-term competitiveness of the UK economy. However, large-scale sectoral interventions are inherently risky, and the government should approach them with care and rigorous prioritisation.   
  • Clearly defined policy objectives, sufficient scale and longevity are the key ingredients of a successful sectoral strategy. These three principles, supported by robust governance frameworks and adequate government capacity to implement, monitor and phase out the policy when needed, can help minimise the risks of and maximise returns from sectoral interventions.  
  • While the UK’s existing framework for implementing sectoral policy provides a strong foundation for future interventions, there are number of ways in which it could be improved. The reports point to the need for:
  • Greater clarity regarding which sectors are to become the pillars of the UK’s long-term economic strategy.
  • Review and realignment of Sector Deals.
  • Closer integration of Grand Challenges and Sector Deals. 
  • The complexity of the UK economy needs to be reflected in policy. Governments need in-depth knowledge of individual industries and good working relationships with its representatives in order to tailor interventions to the specific needs of targeted industries. 
  • Designing high quality service-sector interventions will become increasingly important in future.Services matter and require policy attention due to their sheer scale, their often-lagging productivity, and the difficulties they face in the aftermath of the Covid-19 outbreak. But they are also crucial because of their increasing importance to the manufacturing industry, their growing export potential, and the significant non-quantifiable benefits they provide (e.g. care sector’s role in wellbeing, or creative industries’ role in UK’s international soft power). 

Andy Haldane, Chair of the Industrial Strategy Council said:

‘A strategic approach to promoting sectors has been a successful ingredient of industrial policy in many countries.  The UK’s record is more mixed, with sectoral approaches often lacking scale, longevity and foresight.  In the light of Covid, which has caused such seismic shifts in the economy’s sectoral make-up, now is the time for the UK to make those big sectoral bets and thereby stimulate productivity, growth and jobs.’

Professor Dame Nancy Rothwell, member of the Industrial Strategy Council said: 

‘While targeted interventions can bring tangible economic benefits, they are not risk- free. The extent of their positive impacts will depend on the quality of policy design and implementation. It is crucial to take a careful, evidence-based and forward-looking approach to sectoral policy, as is to ensure that targeted interventions and their aims align with wider government policies.’ 

Sir Charlie Mayfield, member of the Industrial Strategy Council said: 

‘A sectoral dimension to industrial strategy is vital if this aspect of economic policy is to have meaning to the future competitiveness of the UK and the prosperity that relies upon it. Opportunity exists across many sectors, but it is in services, which are so important to the UK economy, that we need to see this bold ambition. We have seen a start, particularly in creative industries, and now is the time to go much further.’ 

Download the Policy Paper

Download the Evidence Review Paper

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