Transcript - Episode 7: The industrial strategy

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Gaenor Bagley: Today we’re discussing the Government’s initiative to develop an industrial strategy that aims to underpin business growth and enhance productivity.

I’m Gaenor Bagley, PwC's Head of Corporate Purpose and I’m joined by Andrew Sentance, PwC's Senior Economic Adviser.

So Andrew - to begin with, why do you think the Government needs an industrial strategy?

Andrew Sentance: Well I think there are two reasons: one is a longer term issue which is to do with the slow growth of productivity across not just the UK but other economies, but also we are entering this Brexit process and so we need to ensure that the UK economy is in the best possible shape to meet the challenges, whatever they are, of working outside the European Union though we hope we will have a strong trading relationship with the European Union, and that means businesses and industries need to be as competitive as they can be in the current environment.

Gaenor: Ok, that’s interesting. So it’s a really thoughtful document. It sets out a long term strategy. What do you think will be the thing that will make the most difference, what’s the important thing we’ve got to bear in mind?

Andrew: Well I don’t think it’s one single thing. I think there are four broad issues that are going to make the difference between whether the UK economy and businesses is successful or whether it’s not in the future. I think the first is skills and education and here we’ve put a lot of emphasis in PwC on vocational education and technical skills because that’s probably been the area where we’ve under-performed. We’ve done relatively well in terms of building a basic primary and secondary education system and developing university education but it’s that interface between business and skills where we haven’t done so well.

I think the second area is infrastructure, particularly transport infrastructure. There are some very ambitious plans on the table like HS2 but the question is will they deliver for the economy, how quickly will they deliver and will they actually be realised in some cases because I’ve been involved in the discussion about airport policy throughout my career and we still haven’t really decided exactly how that’s going to be resolved.

The third area is in terms of supporting growth, enterprise and employment in business and here the role of the tax system is crucial and fourth area is getting the regional balance of the economy right.

So across all these topics it’s not a question of just one of them. It’s actually getting the, I suppose the, orchestra playing properly, getting the harmony of economic policy working in an appropriate direction.

Gaenor: I think that’s a good point because it can sometimes feel, certainly because in skills area which I know the most about, that you’re getting lots of different initiatives or priorities. It’s quite difficult when you’re advising business to say this is the area where you can focus. So, are you optimistic the government will have to, in order to execute on this, to take a much more holistic, long-term approach?

Andrew: I think that’s the right approach. I think delivering that within government is actually quite difficult because government often tends to be quite siloed. I think one of our big messages, from PwC and from our clients to government, is linking up the various ways in which departments work together and the way in which different policies work together. It’s the key to making a success of an industrial strategy. It’s not just down to the Treasury or down to the business department, it’s a matter of making sure that all the departments that impact on business interact properly together and link up.

Gaenor: Absolutely, so picking up on some of your priority areas: you mentioned that there are some really ambitious plans in there for infrastructure. Do you think that’s the thing that really will make the difference?

Andrew: I think over the last sort of 30 years or so I think the UK has under-invested in various aspects of infrastructure. The major rail investment is one thing that’s being focused on but the various road projects, like the A14 that goes up from the east coast ports to the west midlands, that has been due to be upgraded for the last 30 years, throughout my whole professional career. I think the big challenge on infrastructure is two things: one is it’s actually making sure that these big projects take place and they are delivered and they really deliver the economic benefits, but the second thing is not to neglect the smaller, sort of the local by-pass, the local rail improvement, that could link up smaller sort of communities to, you know, bigger centres of economic sort of, economic growth. So that those smaller projects are actually quite important in dealing with the regional imbalances that we see in the UK at the moment.

Gaenor: Yeah, indeed even intra-regional imbalances that you can have pockets of disadvantaged, really quite close to quite wealthy areas and it’s the local infrastructure that’s quite…

Andrew: Absolutely and though people talk a lot about the north/south divide I think the north/north divide and the south/south divide is just as important.

Gaenor: Which actually leads quite well into skills. So, again that’s something that’s very close to my heart. I work a lot with universities and schools about how can and how should business engage. Is that the right way to think about it? Is that the way to get the best vocational training in the country?

Andrew: Yes, I think if we live in a world where the business sector stands back or the business community stands back and just expects the public sector to deliver basic, primary, secondary and university education that’s going to be sub-optimal. So, where we’ve seen economies that have done the best, like Germany, and performed very well in terms of developing business relevant skills, they have done that on the basis of an interaction between the business community and the provision of vocational and technical education. And that’s been an area where the UK has been quite weak for some time and we’re beginning to claw that back with new apprenticeships PwC has been involved with that, but I think we can go a lot further and that should be a priority for the government over the next 5-10 years.

Gaenor: Yes that’s interesting so that’s again a message for business to think about what role they can play about building the skills they need for the future in their area. Now there are already some quite exciting partnerships going on there so it’s quite encouraging to see how that’s going to develop.

Andrew: Absolutely, it’s a question of building on what’s going on. I mean there has been quite a bit of progress, but it’s been a long-standing weakness going back sort of 30-40 years that needs to be remedied.

Gaenor: And is there something we need to think about in terms of digital, robotics, the changes coming in technology - if we don’t take that into account then these skills we’re going to develop are going to become out of date very, very quickly. Do you have a concern there that digital change isn’t built into the industrial strategy enough?

Andrew: Well technology is a big challenge for both business and policy makers and if went back to the early 1980s we could not have foreseen the way in which the internet and all sorts of things that have flowed from that have changed the way in which we work and the way in which we operate. I think the big challenge for business and policy making is to be flexible and to be able to adapt to the changing technology environment. Nobody can predict exactly how technology is going to unfold but if we are trying to encourage people, businesses and policy making to be more flexible to changes in technology I think it’s the best thing that we can do.

Gaenor: Yes, they’ve got to know enough in order to adapt. But they don’t have to be the finished article because that will be out of date.

Now that’s great. That was a really good summary actually. What seemed like quite complicated into some really key areas that are going to be important for business going forward.

So thank you Andrew for your insights. And thank you everyone for listening.

We’ll continue to discuss these issues in more detail over the coming weeks. For more insights from PwC on Brexit please visit pwc.co.uk/brexit.

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