Written evidence from the British Chambers of Commerce (ISG 181)

The British Chambers of Commerce (BCC) sits at the heart of a network comprising 52 accredited Chambers of Commerce in the UK, plus a fast-growing Global Business Network. 

In the UK, our network brings together over 75,000 member businesses, and engages with a further 200,000 non-member companies each year. Overseas, our Global Business Network offers practical, on-the-ground help to UK exporters, and supports two-way trade. 

INTRODUCTION

The BCC welcomes the opportunity to respond to the Business, Innovation and Skills Select Committee inquiry into the Industrial Strategy. UK accredited Chambers of Commerce help businesses connect locally, have a deep knowledge of local business requirements and connect local businesses to global opportunities.

The BCC believes that setting a series of national goals or missions that galvanise public and cross-political support could boost new industrial development. There is overwhelming evidence that public-sector funding and activity can, in the right circumstances, create comparative advantages in our private industry and support technological breakthroughs that increase our export potential. From our national defence needs to our aerospace industry; our national health system to our success in pharmaceuticals – the common feature is that these are demand-led successes in which government has worked in partnership with industry to deliver on non-economic objectives.

By creating the demand for new solutions, new industrial champions and technologies can emerge. But this also requires that the UK commits more to improving the fundamentals of economic success: investing more in skills and infrastructure; re-visiting land-use policy in the planning system and tax disincentives to remove the financial and planning consent barriers that hold back growth; and ensuring that the regulatory environment more broadly helps rather than hinders success.

By contrast, an ‘industrial strategy’ – at least as that term is traditionally understood – is in our view unlikely to drive long-lasting and positive change in the country’s economic performance and geography. Our experience of past strategies in the UK and overseas is that they suffer from at least three fatal flaws:

• They are supply-side oriented, which inevitably means picking winners on incomplete information, be they sectors, companies or technologies;
• The level of industry-specific knowledge required to design interventions renders them vulnerable to capture by special interests; And
• Funding directed at commercialising new technology and research will involve many more failures than successes – this is inherent to private-sector R&D but problematic for traditional measures of value for money used by the government to evaluate economic projects.

The BCC proposes an approach based around four principles:

• Define national missions with broad and long-lasting appeal
• Improve the economy’s fundamentals
• Be sensitive to geography
• Be flexible

THE FOUR PRINCIPLES

The BCC proposes the application of four principles to ensure we deliver a fit-for-purpose approach to encouraging industrial development. Crucially, these principles will aim to ensure that local growth plans in the nations and regions can be aligned or evolve with national efforts in a way that complements the devolution agenda and does not cut across it.

1. NATIONAL MISSION

• First and foremost, the approach should be based around a small number of a national missions or goals that secure the broadest public and political support. These missions could be technological / scientific; infrastructural; environmental; cultural.
• They must be clear, ambitious, long-term objectives that can work with devolved/local strategies.
• They must create new demands of industry – it should be for industry to rise to the challenge as they develop new specialisms and capabilities to deliver on them

2. FOCUS ON THE FUNDAMENTALS

• Increased access to finance for all companies, especially SMEs, regardless of sector or region to incentivise business investment.
• Deliver long-term energy security at a low cost and business infrastructure such as road, rail, and digital.
• Closing the skills gaps to help young people succeed in the workforce and enable businesses to compete on the global stage.
• Increased resources to directly support SME trade prospects - vital support for those firms looking to access new markets.

3. GEOGRAPHY

• It must be sensitive to geography, with flexibility to the local skills base, infrastructure and economy.
• Focus on leveraging regions’ strengths and resources to take advantage of domestic and international opportunities through further development of their competitive advantages.

4. FLEXIBILITY

• Ensure mechanisms for feedback and continuous improvement of the approach by allowing both failure and success to guide the delivery of the national missions. This would warrant a robust, but flexible appraisal methodology for projects and funding cycles.
• Engagement and consultation with the business community, which the BCC can facilitate, via 52 Chamber across the UK representing tens of thousands of businesses (30,000 of whom are exporters).

INTERVENTION AND FOREIGN TAKEOVERS

• A strong, economic value test should be introduced to determine whether future deals have clear economic value to the UK. This could involve looking at best-practice models from around the world, such as the Australian Foreign Investment Review Board.
• The strategy must not crowd out investment by the private sector, domestic or foreign, while ensuring such foreign takeovers pass the four principle/tests outlined above.

ROLE OF THE BCC

• The BCC can facilitate engagement with the business community, via 52 Chamber across the UK representing over 75,000 member businesses of all sizes, sectors and locations.
• Accredited Chambers of Commerce have a role in connecting local businesses, advocating on behalf of their membership and encouraging local economic development.
• Further, Chambers of Commerce, both in the UK and overseas, are able to provide ongoing trade support by linking UK exporters with other businesses that can give encouragement, expertise and recommendations.
• The BCC can also regularly provide data on business priorities and many Chambers of Commerce have dedicated policy groups established, to gather the views of the business community and forge stronger links with partners in the public sector.

The BCC remain keen to engage further as this inquiry progresses. For further information, please contact: Fiona Krasniqi, Public Affairs Officer, f.krasniqi@britishchambers.org.uk

October 2016

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