Senior Director / Head of Economics
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The Strategy sets the scene for the UK’s key economic drivers with the ambition to narrow the productivity gap and boost earning power across the country. It demonstrates the Government’s proactive approach to new technologies and in responding to a changing economic context. In doing so it looks to build on the country’s strengths and address its weaknesses.
It is formed around five ‘foundations’ of productivity:
The Government also sets four ‘Grand Challenges’ to put the UK at the forefront of the industries of the future:
Key policies include the following funding initiatives centred around the five foundations:
There are strong links to elements Philip Hammond spoke of in the budget such as housing and transport investment, particularly with reference to the combined authorities and the Transforming Cities Fund. For example, the National Infrastructure Commission will launch a new innovation prize to determine how future roadbuilding should adapt to supporting self-drive vehicles. The West Midlands will be a key testing location given its expertise in autonomous vehicles. There are also acknowledged links with existing projects such as HS2 which is seen as an example of how an infrastructure project can deliver the wider ambitions of the Strategy.
Housing is recognised as a key part of the ‘infrastructure’ required to deliver the Strategy. Importantly in the context of the recently closed consultation on the proposed standard method for calculating local housing need. The Strategy reconfirms the stated need to deliver 300,000 homes a year outlined through the recent Budget. The important link between economic growth and housing provision is articulated through the Strategy which confirms that the Government will ‘deliver bespoke housing deals with places where housing demand is high [and] wants to support places with ambitious and innovative plans to build additional homes where they are needed, and which will support wider economic growth'. It is of note that housing makes up the largest allocation to date of the National Productivity Investment Fund (£11.5bn already allocated).
Though a national strategy, the localism agenda is still evident, with areas required to develop Local Industrial Strategies, led by the Local Enterprise Partnership (LEP) and to be agreed with central Government. Mayoral Combined Authorities will have a single strategy led by the mayor and supported by the LEP. Shared geographies, such as across the Northern Powerhouse, Midlands Engine, Cambridge-Milton Keynes-Oxford corridor and Thames Estuary, will be supported in working together. The initial focus will be on areas with the potential to drive wider regional growth, focusing on clusters of expertise and centres of economic activity, with the first to be agreed by March 2019. They will identify local priorities to improve skills, increase innovation and enhance infrastructure and business growth. The role of these strategies in ‘setting’ the wider planning agendas for the major conurbations will form an important consideration, as will the pace at which they are progressed. How such strategies will dovetail with Local Plans and the Strategic Economic Plans of LEPs and the degree to which developers and businesses will be able to influence and respond to the strategies in delivery are all important questions for the LEPs / Mayors and the Government to consider as they are progressed. In bringing the national agenda to the local level there is a danger that the proactive approach taken centrally may lose some of its focus.
A number of Sector Deals have been progressed since the Green Paper. These are in life sciences; construction; AI; automotive (electric and autonomous vehicles); and creative industries (digitalisation). The deals are focused on responding to specific issues to create opportunities to boost productivity, employment, innovation and skills. Specifically for the Construction Sector Deal there is a focus on skills and recruitment. Labour force volume in the sector has been raised as an issue over a number of years and so this is welcomed in light of potential further impacts from leaving the EU.
Converse to the Green Paper earlier in the year, there are a number of aspects which subtly indicate the crucial role of the logistics sector in enabling economic activity, such as the ‘Future of Mobility’ challenge, and ways in which it can be a part of technology innovation, such as AI and clean growth. The links to the logistics sector could be made clearer here.
Overall, while the Strategy focuses on some big ticket items, and big funding to match, it is non-prescriptive on a number of fronts. Understanding how the ambitions will be delivered will be particularly important. More detail is required to ensure the Government is fully evidencing how business, civil society and academia can each play a part. Importantly for the development industry, the role of the planning system in bringing forward the industrial agenda is yet to be set out by the Government.
27 November 2017
Senior Director / Head of Economics