What’s [rural] in the Industrial Strategy?

In her leadership speech Theresa May set out her aspirations “to get the whole economy firing”. One of her first actions as Prime Minister was to begin the development of an Industrial Strategy. In November 2017 the Government published this much awaited document. Heralded as a new approach to how Government and business can work together to shape a stronger, fairer economy – under the strap line “building a Britain fit for the future” – what might it mean for rural communities? Jessica Sellick investigates.

A speech by Greg Clark back in July 2016 suggested the Industrial Strategy should be a number of things: from providing a long term, predictable and sustained approach to policy making, through to creating an environment in which businesses can be founded, expand and prosper; and where connections are made between Government policy and business decisions, industries and places, research and practice.

The resultant Industrial Strategy, published in November 2017, sets out five foundations of economic policy: (1) ideas – research and development, innovation; (2) people – skills and education; (3) infrastructure – broadband, energy and transport; (4) business environment – support for Small and Medium Enterprises and specific sectors; and (5) places – tackling regional disparities. Improving the foundations, the Strategy argues, will help tackle four challenges: (a) how to embed and maximise the advantages of AI and data; (b) the adoption of low carbon technologies across the economy; (c) automation and infrastructure; and (d) healthcare and labour market challenges amid an ageing society.

The Strategy highlights four sectors where Government will agree deals to drive transformation in investment and productivity across the economy: life sciences, construction, artificial intelligence and automotive. The Government has also proposed the creation of an Industrial Strategy Council – formed of businesspeople, economists and academics from across the UK – to assess and evaluate the Strategy and make recommendations to Government.

In a set of rural words back in September 2016 I described what we might learn from previous Industrial Strategies – exploring the meaning of the term, the kind of Strategy that was emerging and what it could mean for rural areas. Writing back then I suggested the Strategy might have three areas of focus for rural communities: sectors, place and governance. With the Industrial Strategy now published, does it cover these three areas of focus and/or what impact might it have on rural areas? I offer three points.

In terms of sectors, Defra published its latest edition of the Statistical Digest of Rural England in November 2017. While ‘agriculture, forestry and fishing’ accounted for 3.9% of local units of registered businesses in England, they are dominant sectors in rural hamlets and rural villages – in a sparse setting more than half the registered businesses are in these industries. This sector accounts for 15.3% of local units of registered businesses in rural areas overall. Other important sectors in rural areas include ‘professional, scientific and technical services’ (14.9% of businesses), ‘wholesale and retail trade, repair of motor vehicles’ (13.2% of businesses) and ‘construction’ (11.3% of businesses). These sectors are taken up in the Industrial Strategy.

Agriculture is referenced in the application of artificial intelligence and data analytics technologies to enable the more efficient use of energy and resources (page 41); as part of a shift to clean growth and fulfilling commitments made during the Paris Agreement (page 42); as part of a need to build on our capability in precision agriculture (pages 43 and 75); and as an attempt to put the UK at the forefront of the global move to high efficiency agriculture (page 47). The Industrial Strategy also references a new Industrial Strategy Programme in agriculture: ‘transforming food production, from farm to fork’ (pages 144 and 148); and, amid Brexit, a commitment to establishing a new partnership between Government and the whole food chain (page 188).

Scientific and technical services are referenced in the application of innovation (page 59); and in the Strategy’s vision “for a knowledge-led economy…underpinned by world-class facilities and international collaborations that push scientific frontiers” (page 67). The Industrial Strategy outlines a number of initiatives including 5G test beds (page 153) and the development of regional Digital Innovation Hubs (page 196). The Strategy specifically focuses on Artificial Intelligence (AI) (pages 32, 33, 36-41) and data (pages 28 -29, 36-41).

The strengths of the motor/automotive industry are referred to i.e., how we’ve successfully rebuilt the UK automotive industry by deliberately attracting investment from abroad (page 20); alongside commitments to increase the automotive share of the global market as it shifts to clean energy sources and efficient new materials (page 43); develop new mobility solutions (page 49); and use leading edge research and development (page 60). The document further highlights the importance of collaboration (page 166) and outlines an ‘Automotive Sector Deal’ (pages 183, 201-202).

References to construction are littered throughout the Strategy: from setting out the UK’s credentials (page 43) to increasing construction’s share of the global market as it shifts to clean energy sources and efficient new materials (page 43). The document sets out a number of initiatives, including (1) The establishment of an ‘Office for AI’ which will work with six priority business sectors including construction (page 40); (2) a Transforming Construction Programme with up to £170 million available to take advantage of new technologies to provide safer, healthier and more affordable places to live and work (pages 45-46, 74); (3) the creation of a new technical education route known as ‘T levels’ (page 102); (4) a National Retraining Scheme to fill skills and shortages in construction and digital (page 117) – including an extra £34 million to expand innovative construction training programmes across the country (page 119); and (5) a ‘Construction Sector Deal’ (pages 197-198).

Compared to other sectors identified by the Statistical Digest the Strategy contains fewer references to retail: although it is identified as a sector the Government wants to work closely with on the foundations of productivity so as to drive up the earnings of people employed and enhance national productivity (page 171). It also contains a case study of the Monster Group, an online retailer (page 185).

Since the Strategy was published further information about the Sector Deals, a Food and Drink Sector Council and Challenge Fund (ISCF) – including calls for Research Hubs and Batteries Research Institute – have been announced.

However interconnected issues such as workforce, how it will lead to jobs being in places where people need them and partnership working with the private sector has not been full taken-up. A report from the Institution of Engineering and Technology (IET) on the Skills and Demand in industry, for example, found nearly two-thirds (61%) of the engineering and technical workforce considers the recruitment of staff with the right skills as a barrier to meeting their business objectives over the next three years. 75% agree that tackling the skills problem is fundamental to making the Government’s Industrial Strategy viable.

While the sectors identified in the Industrial Strategy are aligned with those in rural areas, what this new sectoral approach will mean for rural areas – and how it fits with interconnected issues – remains unclear.

According to the Statistical Digest of Rural England, in 2015-2016 there were 537,000 businesses registered in rural areas, accounting for 24% of all registered businesses in England and employing some 3.5 million people. The Digest reveals how there are proportionately more registered businesses per head of population in predominantly rural areas compared to predominantly urban areas (excluding London). It further highlights the significance of smaller businesses – with 28.6% of people employed in registered businesses with up to 9 employees compared to 18.7% of people in urban areas. In urban areas 28.9% of people are employed in registered businesses of 250 employees or more whereas in rural areas this figure is much lower at 15.8%.

The Industrial Strategy makes sixteen direct references to smaller businesses: from boosting the digital economy by working with Ordnance Survey to open up freely OS MasterMap data (page 159) to giving attention ‘to ambitious, high potential small and medium sized businesses that are critical to jobs and productivity’ (page 172); and the establishment of a Small Business Commissioner to help small businesses on payment issues, dispute resolution and sourcing advice (page 176).

Back in 2003 Professor Michael Winter undertook a literature review of the English rural economy. This examined how rural labour markets functioned, the degree of interaction between different sectors, geographical constraints, linkages to the urban/regional/national economy and the impact of public policy on rural economies. The review took up the notion of ‘embeddedness’ to describe local social relations of production and consumption based on trust relations. In the words of Kippner “congealed into every market exchange is a history of struggle and contestation that has produced actors with certain understandings of themselves and the world that predispose them to exchange under a certain set of social rules and not another” (see page 34).

More recently, Professor Tim Jackson has published work on achieving prosperity not based on growth. He emphasises meaningful work rather than simply making an income; where businesses are not about making more stuff rather delivering services that improve lives; and where taken together work, enterprise, investment and money are not about accumulating wealth for the few at the top of the food chain but in ways that better serves communities and create lasting prosperity.

The Industrial Strategy is high-level in seeking to provide connections between Government and business. How will this translate into effective and targeted policies that recognise the embeddedness of rural businesses and lead to the prosperity of rural communities?

In terms of place, in the speech Greg Clark delivered back in August 2016 he described how “every business is located in a particular place”. During its development, there were calls to make sure the Industrial Strategy made the most of cities and city regions. The resultant Strategy references ‘rural’ fourteen times: around devolution (pages 27 and 219), as part of a recognition that different policies will be needed in different local economies (page 217), as part of a commitment to invest in places across the UK (pages 132 and 216), including in transport (page 132) and 5G (pages 151 and 154). The Strategy also contains a case study of the Smart Islands Programme on the Isles of Scilly (page 146) and the example of the South West Rural Productivity Commission as part of attempts to ensure rural areas are able to contribute to and benefit from economic growth (page 225).

The Strategy is accompanied by a series of spreadsheets containing maps showing the location of industrial clusters for fifteen sectors. Drawing on research that shows businesses in clusters benefit from agglomeration externalities such as knowledge spillovers, better access to relevant skills and reduced costs due to supply chain integration; the spreadsheets and maps seek to provide evidence for the location of sector strengths across the UK. In technical terms, the methodology used combines the Density-Based Spatial Clustering of Applications with Noise (DBSCAN) and Kernel Density Estimation (KDE). For each of the fifteen sectors three maps have been produced showing: (i) the clusters produced by DBSCAN, (ii) overlaying the KDE with the DBSCAN cluster shapes, and (iii) an employment growth map. While the data is listed and mapped, there is not accompanying spatial description of what is presented nor how to interpret what is displayed.

All of this opens up debates around what is the ‘right’ economic geography – what is the most appropriate spatial unit(s) within which the Strategy should sit and how can we ensure the resultant policies consider rural areas?

For me, the Strategy needs to lead to a territorial approach that benefits rural places in ways that help people find a job where they live, improves their access to services and advances mobile and broadband connectivity. In a previous set of rural words I explored how rural England was becoming a white space in the devolution agenda. How can we make sure rural areas are not forgotten in the Industrial Strategy?

In terms of governance, a new Industrial Strategy Council is to be established, comprising representatives from academia, investors and economists. Dr Craig Berry, from the University of Sheffield – who was one of the Commissioners who shaped the Strategy – has described how “the proposed advisory council falls short of the OBR-style monitoring body required to embed industrial strategy into the routine agendas of future Governments.” A further point was made around the need for HM Treasury and the business department (BEIS) to work together in the implementation of the Strategy. How do we know what success looks like and how will its impact be measured? Will the Council include a representative(s) with an interest in rural matters?

The Industrial Strategy has been heralded as a ‘blended approach’; combining horizontal policies (in seeking to address market wide issues), sectoral policies (through the Sector Deals) and being mission based (through the Grand Challenges). IPPR’s discussion paper on the Strategy suggests its scope might also focus on the ‘everyday economy of ordinary firms where most people are employed’ (page 3). If this is to happen we need to ensure rural is on the Government’s radar.

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Jessica is a researcher/project manager at Rose Regeneration; an economic development business working with communities, Government and business to help them achieve their full potential. Her current work includes supporting a Lottery programme to help people into paid work; research for the NHS on rural workforce issues and supporting a community rail partnership. She can be contacted by email jessica.sellick@roseregeneration.co.uk or telephone 01522 521211. Website: http://roseregeneration.co.uk/ Blog: http://ruralwords.co.uk/ Twitter: @RoseRegen

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