The Investor 93

THE INVESTOR

businesses start and grow, and encouraging trade

and investment.There is a lot of catching up to do.

Productivity is more than 30% higher in the US than in

the UK,with France and Germany close to US levels.

Perhaps most interesting is what the green paper

says about‘cultivating world-leading sectors’ of the

economy. It aims to develop what it describes as‘sector

deals’with the ambition of ‘addressing regulatory

barriers; promoting competition and innovation;

working together to increase exports; and working

together to commercialise research’.

What sectors could propel the UK forward over the

coming years?Among those chosen for early progress

by the government are the life sciences, ultra-low

emission vehicles, industrial digitalisation, the nuclear

industry and the creative industries.

The government is on more familiar ground when

it highlights the progress made in existing deals for

the automotive and aerospace industries.There has

been an industrial strategy in place here for a number

of years.The emphasis on these sectors will remain,

which is why retaining inward investment by firms

such as Honda,Nissan andToyota, as well as the UK’s

continued involvement in theAirbus consortium,will

be important.To ensure Nissan builds newmodels

in Sunderland, the May government has already

promised that it will fund an InternationalAdvanced

Manufacturing Park next to the carmaker’s factory.

With nearly four-fifths of the economy accounted

for by the service sector

, including the City, an

industrial revival would not be enough. So business and

professional services, together with financial services

– the UK is highly competitive in all three – have been

selected for a similar approach that will also lend itself

to newer developments such as financial technology,

or‘fintech’.The government is trying to steer a fine

line between the now-discredited 1970s-style‘picking

winners’ approach and an‘enabling’ strategy that

creates conditions under which businesses can thrive.

Since the referendum,Whitehall has been talking to

rexit is under way.

Theresa May’s

government has

embarked on the

formalArticle 50

process of exiting the

EU. It has set out its

ambitions in a white

paper (

The United

Kingdom’s exit from,

and new partnership

with,the European

Union

, February 2017).The question now is whether,

and how, the government can make a success of it.

In the run-up to last June’s referendum, the

official answer to that from the anti-Brexit Cameron

government was clear.A long-term economic impact

assessment by theTreasury concluded that the economy

would shrink by between 3.8% and 7.5% (for the

extremes of a Norwegian-style arrangement and that

of operating underWorldTrade Organisation rules) by

2030 outside the EU

. Time and politics have, however,

moved on.The May government is committed to making

Brexit work. In framing new trade deals, the government

will have an opportunity to influence the shape of the

post-Brexit economy. But that also means that trade-

offs may have to be made between the interests of the

many and varied sectors of the economy.

Two official documents capture the government’s

Brexit ambitions: the white paper itself and the

industrial strategy green paper (

Building our Industrial

Strategy

, January 2017).The white paper sets out 12

ambitions, including a smooth and orderly exit, a new

strategic free-trade agreement with the EU, new and

‘ambitious’ trade agreements with the rest of the

world, and control over immigration by EU nationals.

The last commitment, responding to a key element

in the campaign by the‘Leave’ side, is tempered by a

pledge to‘remain an open and tolerant country, one

that recognises the valuable contribution migrants

make to our society and welcomes those with the skills

and expertise to make our nation better still’.

That will be important, as will a pledge that overlaps

with the industrial strategy green paper: that the

UK should remain‘the best place for science and

innovation’ and continue to cooperate closely with

other European countries in those areas. In its industrial

strategy document, this is the first of ‘10 pillars’ that

Greg Clark, the Business Secretary, says are essential

‘to earn a prosperous living in the years ahead’.Among

the other pillars, perhaps unsurprisingly, are developing

skills, upgrading Britain’s infrastructure, helping small

Sources: 1 gov.uk, April 2016; 2 ons.gov.uk, September 2016

Thewhite paper sets out

12 ambitions, including a

smooth and orderly exit

and a strategic free-trade

agreement with the EU