London When British Prime Minister Rishi Sunak was asked last year who the most important head of government in Great Britain was, he answered without hesitation: “Margaret Thatcher.” Before he moved into 10 Downing Street, Sunak promised the British a “common sense Thatcherism”.
However, her conservative party friends prevented this out of national pride. Thatcher complained of “pseudopatriotic hysteria”. Western economic politicians took their cues from Thatcher for decades. But now even Thatcher fan Sunak is moving away from her teaching.
The focus of his industrial policy is currently primarily on the transformation of the domestic automobile industry to electromobility. Chancellor of the Exchequer Jeremy Hunt wants to present details on November 22nd when he presents his “autumn budget”.
Where London wants to support
Manufacturing plays an important role in the UK economy and the Chancellor has identified advanced manufacturing as “one of the top five growth sectors”, an internal UK government discussion paper said.
London also wants to support green industries, digital transformation, especially in the development of artificial intelligence, financial services and the life sciences industry.
Great Britain is joining an industrial policy offensive that US President Joe Biden gave the starting signal for and which the EU and especially Germany are willingly following. Whether it is about protecting key industries such as the chip sector or promoting climate-friendly technologies – in the wake of geoeconomic competition, the state has given up its previous restraint in many places and has become an active player in the economy.
The UK is a latecomer to this global megatrend. The manufacturing sector on the island has been neglected by the conservative government for many years. Money and political attention was focused primarily on financial services. Industrial policy sounded too much like the “old economy” and reeked of socialist ideas with which the then ruling Labor Party had strangled the British economy in the 1960s and 70s.
So far, the economically liberal Tories have said: The best industrial policy is not to have one. “We do not have an industrial strategy as such,” emphasized British Economy and Trade Minister Kemi Badenoch. The Department for Business, Energy & Industrial Strategy was dissolved and dismantled by Sunak.
“Action plan” with Biden
As recently as February, Badenoch branded the US “Inflation Reduction Act”, which is actually an industrial policy subsidy worth $360 billion, as “protectionist”. However, during his visit to Washington in June, Sunak switched to Biden’s course and agreed with the US President on an “action plan” that reads like an industrial policy manifesto.
“The lack of a real, planned industrial strategy is Britain’s Achilles heel,” said Stephen Phipson, head of industry body Make UK. All other major economies, from Germany to China to the USA, have a long-term national plan for the manufacturing sector that underlines the importance of the industrial base for the success of the entire economy, the association boss complained.
He criticized the government’s current lurching course as “flip flopping”. The new “Advanced Manufacturing Plan” is now intended to change that. London is prepared to spend a lot of money to underline its industrial policy ambitions.
During Sunak’s visit to Washington in June, he agreed with the US President on an “action plan” that reads like an industrial policy manifesto.
(Photo: IMAGO/UPI Photo)
According to media reports, BMW will receive 75 million pounds (almost 90 million euros) of tax money so that the German car manufacturer can invest 600 million pounds in the production of the electric “Mini” in Great Britain.
The establishment of a four billion pound battery factory in Sommerset by the Indian industrial group Tata is even worth government aid of 500 million pounds to the British. But that’s not all: the British aerospace industry is to be supported with 685 million pounds over the next three years.
>> Read here: Tata wants to build a new battery factory in Great Britain
The government is spending almost £650 million on the High Value Manufacturing Catapult program to help industrial companies bring technologies to market.
Mini had originally indicated that it wanted to relocate almost all of the production of its electric models to China and only manufacture combustion engines in Oxford.
(Photo: IMAGO/Manfred Segerer)
“Governments cannot pick winners,” said Economics Minister Badenoch in July, justifying her new industrial policy course, “but we can help companies succeed by removing obstacles or compensating them with targeted support for the regulatory burdens that their competitors in other countries face Countries don’t have it.” The “Advanced Manufacturing Plan” will ensure “that we are internationally competitive.”
However, the British cannot compete with the three-digit billions of dollars with which the USA and the EU support their domestic industries. “It is particularly unfair to expect Britain to match the gigantic efforts of the United States,” said Giles Wilkes, an economist at the London Institute for Government.
However, the limited financial resources are only one factor that limits London’s scope for industrial policy. The long neglect of industrial policy has undermined the government’s powers.
It is therefore a legitimate question as to whether the government even has the ability to intervene effectively in the economy. There is no help in sight. The British, for example, are missing from the “green and digital bridge” between Europe, the Middle East and India agreed on the sidelines of the G20 summit in New Delhi.
As a result of Brexit, Great Britain has become a kind of no-man’s land in the battle between the major powers for geo-economic supremacy.
More: Will there be an upswing after Brexit?