July’s general election not only ushered in a new Labour government but also a new era of industrial strategy. When the Chancellor, Rachel Reeves, launched a consultation into Invest 2035 a few months later, she made it clear how integral this ten-year plan is to Labour’s ambitions. She wrote: “Growth is the number one mission of this government. Our new industrial strategy is central to that growth mission.”
To make its industrial strategy work and to get the UK building effectively again, Labour knows it must unlock the talent, expertise and investment of the private sector. But what does public-public private sector collaboration look like in practice? And which barriers must policymakers and industry overcome to turn warm words into the successful delivery of major infrastructure projects?
To explore these issues and more, the New Statesman and Arup convened a roundtable discussion to coincide with the Politics Live Conference 2024 which took place in mid-November.
Reasons to invest, sources of finance
Opening the discussion, Catherine Atkinson, the Labour MP for Derby North and a member of the Transport Select Committee, said: “Infrastructure is central to people’s day-to-day life, whether they know it or not – whether it’s the roads that we drive on or the internet we browse or the water that we drink. Despite that – particularly for the last 14 years – it’s felt like infrastructure and investment have been dirty words.”
Building on that theme, Arup director Tom Bridges said: “If we want private sector involvement in financing and delivering infrastructure, then the conversation with the private sector needs to happen earlier.” Bridges called for a “process of co-production so projects can be specified, planned and designed” in a way that makes them investable. “It’s not just to get investment off the balance sheet,” he said, “but also to get better planning and delivery.” It is, Bridges said, about “designing to budget”.
For Lloyds Banking Group’s Richard North, it is time to think more creatively about how we fund infrastructure projects. He observed how transport is almost exclusively paid for by the public purse. Instead, the banking group’s policy and public affairs: net zero and agriculture representative said we should look at “really effective models to draw in private investment”.
While financial instruments such as CFDs (contracts for difference) – used in “capacity markets” such as energy – don’t directly transpose to other sectors, North argued that there is no reason the UK can’t establish “a suite of models” that better reflect and share the risk of investment. He pointed to France, where a transport project might deploy a usage profile to calculate returns, while another might use track availability.
Certainty, certainty, certainty
Ask a group of industry and policy veterans to identify the single biggest barrier to success, and it won’t be long before you hear talk of indecision. Stability matters when investment is large and time lines are long. And stability, it seems, has been in short supply over recent years.
For Ben Brittain, senior public affairs manager at Zurich, “regulatory certainty is really important for infrastructure investment”. Meanwhile, for Catherine Atkinson, it is time to end the frustration of “stop-and-start projects”. And in the words of Arup’s Tom Bridges, it’s about moving away from “constant chopping and changing”. Organisations, he said, need “stability, certainty and clarity [because] that sends clear and consistent signals to the market”.
But is certainty realistic? After all, priorities change, needs change, and the financial health of the nation changes. Shouldn’t organisations expect the unexpected and be ready to adapt accordingly?
Up to a point, said Atkinson, but equally businesses should expect “certainty of strategy that can still enable the flexibility to respond to global events”. In April, the rolling-stock manufacturer Alstom – a major presence in her Derby constituency – lost 1,000 years of welding experience through redundancies. This could have been avoided with better infrastructure planning. “Certainty is so important to pipeline,” she said. “If you have that pipeline, it allows you to retain those skills.”
Paul Addison, a non-executive director at the business advocacy group vocL, suggested we should embrace what is likely to be a “golden window” of certainty. Given the size of Labour’s parliamentary majority this is “arguably the most stable government in the West”, said Addison. “Right now we should be the place where investment comes,” he added.
Industrial strategy: picking winners?
On industrial strategy, there was some concern that the government’s words might not be matched by its actions. Paul Thompson, public affairs lead at the power company VPI, asked: “What is fundamentally going to change in the way government thinks about how it delivers key infrastructure, not just in the next ten years but in the next 50 years?” There is a risk, he said, that we end up “tweaking” the model rather than making major changes.
It was a thought echoed by Mark McVitie. McVitie is director of the Labour Growth Group, an alliance of nearly 100 Labour MPs – many of them newly elected – dedicated to “tearing down the barriers to economic growth”. He warned against “piecemeal tinkering” and the “incrementalism” that might follow once “armies of civil servants” and multiple “independent assessments” threaten to slow down the ambitions of the government. He urged, instead, for “one big bang” to change and facilitate the market.
For some, the industrial strategy of the 1970s was tarnished by “picking winners” such as the car manufacturer British Leyland, at the expense of others. So should the 2020s incarnation of industrial strategy pick winners, too? Or should it be less prescriptive, and less interventionist?
For vocL’s Paul Addison, industrial strategy is not about picking specific companies; it’s about picking particular parts of the economy. The previous government, he noted, had half a dozen growth strategies. What’s needed instead is an “anchor” for our strategic thinking. That means identifying sectors that have most to gain.
Ben Brittain recalled his time working alongside the former West Midlands mayor Andy Street. “What we decided to do was aim to close the growth gap between the West Midlands and London. That should be the ultimate aspiration of this industrial strategy… not only [to] focus on sectors but on conglomeration of clusters as well. A part of that is a recognition that different regions have the foundations to specialise and excel in different things. That’s why a localised focus to industrial strategy is worth pursuing.”
“I do think it is about picking winners,” Andrew O’Brien, director of policy and impact at the think tank Demos, by way of contrast. He pointed to the interventionist creation of a UK chemical industry from 1914 onwards. ICI became a British success story and, in turn, centres of chemical expertise emerged wherever ICI was based. “The danger for the UK,” said O’Brien, “is in trying to spread our bets across 20 or 30 medium- to small-sized interventions. Instead, if you want to win, you’ve got to create monopoly-style positions.
“The risk to me with Labour is I don’t know what the strategy is. I don’t know how Rachel Reeves thinks the economy grows – is it housing, is it skills, is it exports, is it endogenous growth? What drives long-term decision making is your theory of economic growth. For the Thatcher government it was very clear. For the Blair government it was all about financial services, high tech, a globalised economy and the expansion of universities.”
Antony Manchester, managing director and co-head of global public policy group at BlackRock, added: “We talk about picking winners, but maybe it’s about picking a strategy and sticking with it,” Manchester said. “At the moment we are hearing a lot about everything.”
Decision-making: from Whitehall to the regions
There was a final theme that ran through the discussion: the merits of centralised or place-based decision-making. Some welcomed the growing influence of the devolved regions and nations in planning and strategy. “People need to tangibly see what economic growth really means for them in terms of local skills, jobs, growth and all the good things it brings to their community,” said Stephanie Howell, public affairs lead at Arup. Others made the case for strategic thinking that emanates from the centre.
Andrew O’Brien from Demos is wary of a drift away from the centre. “I can’t think of a historical example where a country has reindustrialised and rebuilt infrastructure in a devolved manner. The United States in the 19th and into the 20th century centralised rather than devolved to realise great changes. Similarly, Britain centralised decision-making. Japan did the same thing in the postwar period. So it’s an incredible historical gamble to think that spreading decision-making and power away from the centre is [the way to go].”
Zurich’s Ben Brittain argued that effective industrial strategy combines “some dictation from central government” alongside decisions taken at a local level. What you need to avoid, however, is the promise of one-off projects – “a shiny bus stop or a small railway” – at the expense of holistic thinking.
In the context of regional autonomy, Arup’s Tom Bridges asked why there are only nine cities with trams in the UK compared with 30 in France and 60 in Germany. “In those countries, local government is empowered to invest, to borrow against the revenues and [share] the benefits,” he said. “Whether things are done at a national level or a local level, having a delivery-focused mindset matters.”
Building on this point, BlackRock’s Antony Manchester said he has seen examples of where devolution has successfully “got investment out of the door – or certainly started things moving… and maybe that’s because they are bypassing Whitehall. Someone like [the mayor of Greater Manchester] Andy Burnham has visibility and control of all the levers [of power].”
For Catherine Atkinson, too, a mix of the central and local gets the best results. “You can still be setting national strategies… with regions having a say in why and how it’s delivered,“ she said. “In the East Midlands, having [ownership] of strategic thinking is a massive step forward.”
“Strategic partnership through industrial strategy: what public-private sector collaboration is needed to deliver successful major infrastructure projects?”, a roundtable discussion as part of the New Statesman’s Politics Live Conference 2024, organised in association with Arup, took place on Tuesday 20 November 2024 at the QEII Centre, Westminster, London
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