Industrial Strategy:government and industry in

partnership

March 2013

2

Why we need to act

Industrial Strategy

Progress to date

Structure

3

No return to the old growth model

• Previous growth model based on government spending, consumption and property speculation

• Contribution to GDP from Government activity grew from 0.3% between 1990-99 to 0.7% between 1999-2008 – becoming the second most important driver of growth

A stable macro business environment is key to enabling growth

• The deficit means Government spending cannot contribute to growth to the same degree

Why we need to act

Expenditure Contributions to Growth

-4

-3

-2

-1

0

1

2

3

4

1997-07 2008-09 2010-11 2012 2013 2014-15 2016-17

Ave

rage

ann

ual c

ontri

butio

n (

ppts

)

Govt consumption & investment Net tradeOther$ Business investmentHousehold consumption & NPISH#

3.3%

- 2.5% 1.4% 0.2%

2.7%

2.0%

0.6%

GDP growth

OBR forecasts

$ includes dwellings investment & changes in inventories

# non-profit institutions serving households (mainly charitable sector)

Expenditure Contributions to Growth

-4

-3

-2

-1

0

1

2

3

4

1997-07 2008-09 2010-11 2012 2013 2014-15 2016-17

Ave

rage

ann

ual c

ontri

butio

n (

ppts

)

Govt consumption & investment Net tradeOther$ Business investmentHousehold consumption & NPISH#

3.3%

- 2.5% 1.4% 0.2%

2.7%

2.0%

0.6%

GDP growth

OBR forecasts

$ includes dwellings investment & changes in inventories

# non-profit institutions serving households (mainly charitable sector)Source: Office for Budget Responsibility Economic and Fiscal forecasts March 2013

4

UK’s relative position is under threat

• Globalisation and rise of BRICS are changing UK’s relative position in global economy

• Developing countries are competing higher up the value chain, threatening the UK’s traditional comparative advantage

If the UK stands still there is a danger we will be left behind

Why we need to act

5

A stable macro environment is key• Government has laid the broad

foundations … o responsible government

financeso a competitive currencyo support for science, o promoting exports, especially

to emerging marketso competitive business taxes

• … But more is needed to keep a sustained advantage 1

1.2

1.4

1.6

1.8

2

2.2

Jan-07

Jun-07

Nov-07

Apr-08

Sep-08

Feb-09

Jul-09

Dec-09

May-10

Oct-10

Mar-11

Aug-11

Jan-12

Jun-12

Nov-12

Cu

rre

nc

y U

nit

pe

r £

Euro US $

No business would operate without a long term plan

UK exports of Goods and Services to:

0

50

100

150

200

250

Other emerging countries BRIC Other advanced economies EU27

£ b

illi

on

1998 2008 2009 2011

Why we need to act

Industrial Strategy: government and industry in partnership

Industrial Strategy

7

Strategic partnerships – the sectors

Industrial Strategy

Early 2013Aerospace (Launched)Aim: Maintain existing UK market share; secure UK employment

Nuclear (Launched) Aim: Increase inward investment in energy supply chain

Spring 2013 Summer 2013

Life Science Strategy Dec 2011

Life Science Strategy one-year-on Dec 2012

Information EconomyAim: Optimise ICT use by business

Agri-techAim: Developing and exporting innovative technologies e.g. in food security

EducationAim: Grow UK education exports

Offshore windAim: Increase inward investment in energy supply chain

Oil and GasAim: Increase inward investment in energy supply chain

AutomotiveAim: Repatriate supply chain and exploit low carbon technologies

ConstructionAim: Improve competitiveness and productivity to support increasing exports

Professional Business ServicesAim: Export opportunities in developing economies

ProgressSectors Publication of Sector Strategies

o Aerospace “Reach for the skies” - £1bn to fund Aerospace Technology Institute; match funded by industry

o Nuclear “The UK’s Nuclear Future” – £15m for new National Nuclear Users Facility £500m to support other key industrial strategy sectors in Budget 2013• Life Sciences: commitment to sequence the whole genome of 100,000 NHS patients• £125m invested in supply chains to encourage advanced manufacturing investment

Progress to date

• First strategy update for the Business Bank; launching £300m investment scheme• Funding for Lending scheme is encouraging the banks to lend more - if it can mobilize

the projected £60-£80bn• UK Green Investment Bank operational since October 2012 - funded with £3bn

Access to Finance

Procurement• Publishing £84bn of Procurement pipelines• Addressing strategic capabilities, e.g. tunnelling

9

Progress

• Employer Ownership Pilot gives employers direct access to public investment for training through a competitive fund

o £90m of funding to support 37 projects in the first tranche; more than matched by £115m of employer contributions

o Second round closes 28 March 2013; prioritising industrial strategy sectors• £6m for 500 people to study Masters level degrees in aerospace engineering

Skills

Progress to date

Technologies• Seven Catapult Technology and Innovation Centres

o High Value Manufacturing, Cell Therapy, Offshore Renewable Energy, Satellite Applications are open

o Connected Digital Economy, Future Cities and Transport Systems open by June 2013

• Support for “eight great technologies” o £600m funding in Autumn Statement 2012

• Patent Box introduced progressively from April 2013 will provide reduced corporation tax rate of 10% for companies exploiting patented inventions

Regenerative Medicine

Agri-science

Energy storage

Robotics

Big data Synthetic biology

Advanced materials and nanotechnology

Space technology