Levelling up: An Industrial Strategy perspective

  • Levelling up

David Bailey, Professor of Management, University of Birmingham and Phil Tomlinson, Professor of Industrial Strategy, University of Bath 

In this piece David Bailey and Phil Tomlinson focus on the role of the green economy and skills development in efforts to level up in the UK. They also explore some of the challenges and opportunities for levelling up that are presented by the increasing prevalence of automation, data, and technology in manufacturing and in industry more generally.

While the details of the government’s ‘levelling up’ agenda remain unclear, there does appear to be some sort of consensus about the need to ‘level up’ and boost the prosperity of so-called ‘left behind’ places. In this regard, and while the government’s ‘industrial strategy’ seems to have been quietly ditched, there is a presumption the state will play an active role in the ‘levelling up’ process.

But ‘levelling up’ isn’t easy to do. It is a challenging and multi-faceted process that will need devolution, new forms of governance, and partnership working between private and public sectors. Nevertherless, here we identify three inter-linked challenges and opportunities – green transition, industry 4.0 and skills – that government could prioritise to promote more balanced growth, and which could build on elements of the government’s previous industrial strategy.

1. Green Transition

The green economy and the commitment to net zero offers new opportunities for growth. Indeed, the green economy is projected to grow by 11% per annum between now and 2030, with total employment projected to increase from 185,000 today to 694,000 by 2030 and 1.18 million by 2050. Moreover, more than half of these jobs are anticipated to be created in the North and some of the other ‘left behind’ regions of the UK.

The UK is not starting from scratch, either; it has significant expertise in green technologies. For instance, the north of England has strong expertise around generation, storage and low-carbon technologies and processes, especially in nuclear and offshore wind.

Yet, progress depends on significant investment in low carbon infrastructure — in electric vehicle infrastructure, high-speed broadband and hydrogen technology. Indeed, the Green Alliance think tank estimates there is a shortfall of £14.1 billion in low carbon infrastructure investment to 2023.

Many of these projects can be devolved to local authorities, Local Enterprise Partnerships (LEPs) and Combined Authorities (CAs), and coordinated via an overarching strategy setting out a clear direction of travel to underpin business confidence and hence investment. ‘Shovel ready’ low-carbon projects could boost local economic recoveries. In addition, significant skills gaps need to be addressed across the low carbon sector. Local authorities, LEPs and CAs are better placed to play a role with skills providers to diversify into low carbon sectors than centralised skills quangos. Public procurement and demonstrations of low carbon technologies could also boost consumer confidence and enhance ‘take up’. The West Midlands CABLED project in which local authorities trialled electric vehicles across public services is an example of how such projects may work.

2. Industry 4.0

The shift to net zero will be accompanied through the wide adoption and application of Industry 4.0 cross-cutting and platform technologies (e.g., the internet of things, digitalization, artificial intelligence and robotics) that play an enabling role across services and manufacturing. These disruptive technologies are expected not only to change the organisation of production inside and between firms, but also fundamentally transform the workplace, the physical environment as well as lifestyles. For example, digital platforms and enhanced data exchange can improve efficiency across the private and public sectors, while also having the potential to reduce some of the disadvantages associated with being located in remote and lagging regions. It may also open up new opportunities for producer–consumer collaboration, creating entirely new business ventures or transform existing ones via big data analytics and the new platforms.

However, to realise these opportunities, the UK will require significant investment in new digital infrastructure and broadband speeds.  Over the last decade, the emergence of ‘digital divides’ – in terms of capacity, digital capabilities and broadband speeds – has undermined the ability of the UK to ‘level up’ its industrial base and rebalance its economy.  In many ‘left behind’ regions, knowledge and application of new I4.0 technologies is so far relatively limited. I4.0 is a transformative process, not only for the economy but also for culture and wider society. Not being able to embark upon the transformations required will entrench regional inequities.

The new technologies offer the potential for new collaborations and innovation activities between firms in different (and often unrelated sectors). Policy here can seek to nurture and facilitate such collaborations between industries using traditional production techniques and new I4.0 technologies. Here policy platforms for enabling learning between firms across different sectors and knowledge bases has been particularly effective.  In addition, there may also be a prominent role for public procurement to deliberately foster such productive collaborations. Such processes would also benefit from support for entrepreneurship programmes, staff exchanges, research collaboration and enhanced labour mobility between sectors. Here, transformative and holistic industrial policies are required to address the failures and obstacles of the whole regional ecosystem (rather than specific components); such policies are typically multidimensional and not purely focused upon instruments specific to particular sectors. The government’s ‘Made Smarter’ programme ‘made a start in this regard but policy needs to go much further.

3. Skills

A critical adjunct to net zero and the technological revolution is skills. Even before the pandemic, there has been a shift to more non-routine and interpersonal style jobs that require greater technological interaction and digital skills. Today’s school leavers are expected to undertake several career changes throughout their working lives.  An industrial strategy can play a full role to ensure that workers are equipped to deal with the disruptive challenges and take advantage of the opportunities unleashed by technological change.

In today’s modern economy, new high-tech manufacturing requires ‘smart workers’ capable of performing manual and cognitive tasks, that require technical knowledge, digital and problem-solving skills, imagination, creativity and dexterity. We might envisage specialised machine operators and craft workers being sufficiently flexible to work alongside designers, engineers and scientists. Such workers will need interdisciplinary skills to facilitate cross-sectoral collaboration. To some extent this is already happening. For instance, neuroscientists are collaborating with games software developers to recreate new images of the brain. Such collaborations can fuse new industrial pathways.  In a recent pan-European study, Barzotto and De Propris (2018) found that regions endowed with a good mix of ‘smart workers’ facilitates synergies between manufacture and innovative activities and enjoy higher levels of productivity.

The challenge is to train and retrain workers throughout their lives. Key is re-thinking skills and education policy, along the lines of lifelong learning. The UK government has recently announced a Lifetime Skills Guarantee  which will provide UK adults access to flexible loans to access new training throughout their working lives and a greater role for employers in designing publicly funded training programmes. Ultimately, the success of such schemes will depend on uptake – a loan-based scheme may not be particularly attractive to mid-career/changing career workers, with families to support. It might be appropriate to look at Denmark’s flexicurity model, which encourages continuous learning and facilitates retraining in a flexible labour market. Louisville’s ‘cradle to career’ programme that offers residents lifelong support to be active in the labour market is also worth looking at.

One implication of an active skills policy is that it tends to increase labour mobility, as more skilled workers seek better opportunities in ‘employment hotspots’. This, of course, has implications for ‘levelling up’; so called ‘left behind’ places have typically seen a long-term outmigration of highly qualified workers. In order to mitigate this, there is a role for local Skills Advisory Panels (SAPs) to work closely with employers and local training providers to ensure better provision of post-16 education and skills that is tailored to local industry needs. Such bodies need to be forward looking in anticipating future local employment and technology trends.

In this regard, and if the transition to net zero is to be realised, significant skills gaps will need addressing (for example training heat pump installers); SAPs, local authorities and LEPs will need to work with skills providers to diversify into low carbon sectors, and to identify and provide pathways for careers in green sectors. For example, Kent County Council has been active in funding skills providers who deliver training for construction to shift training support into the delivery of skills for offshore wind.

In summary, levelling up needs to be about more than simply ‘rebalancing’ the economy if it is to succeed longer term, and has to embrace the challenges and opportunities of the green transition, Industry 4.0 and skilling and reskilling workers for very different jobs throughout their lives.

 

Photo Credit: Anna Jimenez Calaf on Unsplash

About the authors

David Bailey is Professor of Management at the University of Birmingham and Phil Tomlinson is Professor of Industrial Strategy at the University of Bath. Both contribute to the ESRC’s UK in a Changing Europe programme.