Prime Minister Theresa May will on Tuesday outline her bid to reshape the British economy for a post-Brexit world, reviving the once unfashionable concept of industrial policy 30 years after Margaret Thatcher killed it off.
May will chair the first meeting of the “Cabinet Committee on Economy and Industrial Strategy” in her Downing Street Offices, bringing together the heads of 11 other ministries to set out her vision for a state-boosted industrial renaissance.
“If we are to take advantages of the opportunities presented by Brexit, we need to have our whole economy firing,” May said ahead of the meeting in a statement released by her office.
“We also need a plan to drive growth up and down the country – from rural areas to our great cities.”
After a referendum campaign that revealed dissatisfaction in many of Britain’s struggling post-industrial regions, May is pitching a plan to reunite the country by raising the prospects of those who she casts as “hard-working people”.
The June 23 vote to leave the European Union has raised serious questions about the future of the world’s fifth largest economy, with some surveys indicating a recession, a hit to consumer confidence and a possible fall in investment.
“We need a proper industrial strategy that focuses on improving productivity, rewarding hard-working people with higher wages and creating more opportunities for young people so that, whatever their background, they go as far as their talents will take them,” May said ahead of the meeting.
The challenge is to find a formula that arrests a decades-long decline in Britain’s manufacturing sector by helping firms tackle the challenges posed by globalization without blunting the market forces that make them competitive.
She will make a priority of developing the industries already based in Britain – a push that could help carmakers like Jaguar Land Rover (TAMO.NS), GM-owned Vauxhall (GM.N) and Nissan (7201.T), and aerospace industry leaders like BAE Systems (BAES.L) to weather the Brexit storm.
The strategy will also involve finding new ways to rebalance the economy away from its reliance on the services sector, and ensure wealth is distributed away from the prosperous south east of England.
Whilst policy detail is scarce, the strategy is likely to combine state-backed investment in traditional infrastructure like roads and rail with funding for modern essentials like broadband and lower energy costs, along with a push to train more of the highly-skilled workers industry says it needs.
NOT PICKING WINNERS
Industrial policy has a toxic legacy in Britain.
It was once used to help failing national champions through a series of flawed policies in the 1960s and 1970s that sought to arrest a decline in manufacturing influence.
“We’re not getting into the business of picking winners: it’s more about creating the right environment,” a government source who spoke on condition of anonymity said.
May’s office said the strategy would promote a range of industrial sectors with a focus on addressing long term productivity growth; encouraging innovation and focusing on the industries and technologies that give Britain a competitive advantage.
May surprised French utility EDF (EDF.PA) and China last week with a last-minute decision to review the building of Britain’s first nuclear plant in decades.
The refocusing of Britain’s economic policy, for the last six years aimed at balancing the books and heavily reliant on foreign money to replace state infrastructure spending, also carries a potentially huge political prize.
With the opposition Labour Party, long seen as the champions of the working classes, locked in a vicious internal ideological struggle and losing sway in their traditional heartlands, May has an opportunity to won over those who saw voting ‘Leave’ in the EU referendum a ‘nothing to lose’ protest vote.
“The Brexit vote and euroscepticism was strongest in former manufacturing areas, where the industry has gone, the good jobs have gone and people feel disaffected,” said David Bailey Professor of Industry at Aston Business School.
“If May’s going to do something about reconnecting, manufacturing has got to be part of the story.”