Now that the dust has settled on the Industrial Strategy, there is time to reflect on the structure of local economies. The grand unveiling of the IS8 sectors as the government's key focus led to widespread scrambling among local and regional economies to demonstrate their leadership across the various sectors and frontier industries.
In subsequent blogs, we will return to the IS8, the different proposed strategies and the work already underway. There is little doubt that many of these sectors offer growth potential and could create global leaders amongst UK businesses.
Before we turn our jackdaw attention to the new shiny things, it seemed important to consider the UK nuts-and-bolts economy and the nature of businesses that are almost certain to continue providing the backbone of UK employment and activity. These are the industries central to inescapable trends in the UK economy – the Cinderella Five.
What are the Cinderella Five, and why did they miss the ball?
We have identified the Cinderella Five as Construction, Critical Infrastructure, Logistics, Health and Social Care, and Hospitality and Leisure. Collectively, these industries employ approximately 36% of the UK workforce. Perhaps more importantly, from a regional economic development perspective, these are industries which are relevant to almost every community across the country.
The first observation is perhaps surprising: a government keen to roll out electrification, change borrowing rules to enable expenditure on infrastructure, and continue to press a mantra of 1.5 million new homes would not have embedded construction and engineering into the Industrial Strategy.
The second is that with a need to deliver on their ‘get Britain Working’ agendas across the country, these industries were not in the spotlight.
What is clear is that any productivity improvements in industries that employ 36% of the UK workforce will have a significantly larger impact on overall growth than incremental investments in the frontier industries, vital though they may become.
Why will the Cinderella Five remain mainstays of the economy?
The analysis of the importance of these sectors is less about the industries themselves and more about the unavoidable drivers which underpin their importance.
Construction. The UK requires a large number of new homes; the existing housing stock requires retrofitting for energy efficiency and general age; building safety remains a significant short- and medium-term issue; and, alongside this, commercial construction work will continue.
Critical Infrastructure. As the first industrial economy, the UK has several legacy issues in utility supply and transport infrastructure, some of which have been left unaddressed post-privatisation, resulting in a now-pressing backlog. In addition, the route to electrification is creating a long-term investment requirement in transmission, distribution and local electrical network work. There is almost certainly a career-long time period of work required to replace the transmission and distribution network.
Logistics. The storage and movement of goods are becoming increasingly automated and complex, but this need is not disappearing. In fact, this is an industry that is likely to be omnipresent in local economies but is rapidly moving up the value chain in terms of employment requirements.
Health and social care. It is well recognised that the ageing population will drive increased demand for many types of health and social care, which will, in turn, lead to greater innovation, investment and employment. This is an industry where incremental steps to improve current provision could deliver significant benefits.
Hospitality and leisure. It is inconceivable that society will cease seeking new and interesting ways to spend leisure time. This industry appears to be in the process of change as a result of shifts in consumer preferences and workforce/migrant legislation, but, as a sector, new investment will emerge.
Why is it important to economic development
These sectors will remain relevant for more places and for longer than perhaps any other (with the exception of digital) and yet few locations will have engaged with those businesses to understand their requirements.
In these sectors, businesses will require new skills and routes to new employees, they support varied supply chains which could be localised, new businesses could be attracted to the UK and innovative start-up businesses could deliver growth. These businesses will need land and premises. All of the sectors will be impacted by digital, innovation could change their technology, processes and business models. Businesses in the sector probably need insight into carbon reduction, future regional development plans and legislation.
A sector strategy for these sectors could refine the effectiveness of the approach.
Conclusion
The IS8 are value driven businesses which are likely to create innovation and growth in the global economy. Some areas of the UK will benefit. The health of most local economies are however dependent on existing industries, including the Cinderella 5, which are closer to home. These industries have a key role to play for a long time to come.
Mickledore is an economic advisory business focused on strategy, sector investment, business planning and evaluation. If you are interested in examining the opportunity sectors in you own area contact nwilcock@regionaldevelopment.co.uk