The author writes in his capacity as chair of the industrial strategy council and this article does not necessarily represent the views of the Bank of England where he is chief economist
The UK’s business department closed its industrial strategy directorate this month. The council overseeing the strategy (which I chaired) is also being abolished. In the UK, industrial strategy is dead.
This marks a clear departure from international practice, with most countries having strengthened their industrial strategies in recent years, a trend accelerated by the exigencies of Covid. It also clearly departs from a model that over the past year has had a truly transformative impact in the UK: its Covid vaccine programme. A report published today by the council, focusing on AstraZeneca’s vaccine, sets out that model’s lasting lessons for future growth.
First, it was anchored around a clear, singular mission — develop a Covid vaccine — backed and overseen by the top of government. As international experience shows, this approach is critical for success. Second, to deliver on that mission, any industrial strategy needs to secure and co-ordinate all the links in the supply chain: for vaccines, financing, invention, trialling, manufacture and distribution. This whole-systems approach is crucial as any broken link imperils the mission.
Third, supply-chain plans have to be co-ordinated across government departments and between the public, private and voluntary sectors, in line with their comparative advantage. For the vaccine, that meant the private sector for its invention and manufacture, and the public and voluntary sectors for its trialling and distribution, with co-financing by the public and private sector. Co-creation, co-financing and co-delivery are crucial for success.
Fourth, public procurement — commitments to buy a known amount at a known price — plays a key role in securing the supply chain by de-risking upfront private investment. Such advance market commitments can unlock high-risk ventures with high social returns. The diversification strategy of the UK vaccine task force, which oversaw vaccine procurement, also reduced public health risks while fostering private-sector competition.
Fifth, the success of the vaccine strategy drew on pre-existing strengths in life sciences. This was the result of a long process of research funding and institution-building, including the cell and gene therapy catapult centre to accelerate early-stage research and the UK vaccines network. This demonstrates the importance of strategic sector deals, focused on industries with clear comparative advantage, backed at scale and at length. It is a model other countries have successfully pursued for years.
Last, many international supply chains fractured during the Covid-19 crisis, including for medical supplies. This showed why the capacity to invent, produce and distribute domestically is so vital — not as a substitute for international supplies, but as a complement. This defensive (as distinct from strategic) sectoral approach has application beyond pharmaceuticals, such as to food, energy and some manufacturing. It is also a well-established best practice internationally.
In a sense there is nothing new in the success of the UK vaccine strategy. Its recipe has been followed by many other countries over many decades. The government’s new Plan for Growth contains some elements, including a focus on skills and innovation. But several others are undeveloped or missing entirely. The council’s annual report describes those missing links, which include too little prioritisation, too much centralisation and inadequate evaluation.
As any business knows, you cannot deliver growth if supply-chain links are missing. Those links need to be forged now, drawing on lessons of the UK’s successful vaccine programme. Doing so would not only resurrect industrial strategy, but with it growth and productivity. UK industrial strategy is dead. Long live industrial strategy.
This article has been amended to reflect the fact that the council overseeing UK industrial strategy will be disbanded at the end of this month
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March 23, 2021 at 08:00AM
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