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The UK government is struggling to implement its flagship economic growth policy because of a lack of co-operation between Whitehall departments, a report has found, causing “frustration” among businesses.
The National Audit Office has warned that the Department for Business and Trade, which is leading the delivery of Labour’s industrial strategy, was finding it hard to co-ordinate with the 10 other relevant government departments.
“DBT faces challenges in its relationships with departments who view growth as integral to their own work and therefore have a different approach to growth and prioritisation in those sectors,” the UK’s public spending watchdog said in a report published on Wednesday.
Labour has made industrial strategy a key part of its push for growth, promising a range of “catalytic” government support to encourage investment in eight high-growth sectors of the UK economy including life sciences, advanced manufacturing and creative industries.
The government has received 3,500 responses comprising 27,000 separate answers from businesses, trade groups and academics since launching a consultation in November on how it should run the industrial strategy.
A final version of the strategy is due to be published in June, but initial findings from the DBT circulated to industry this week cited burdensome regulation, high electricity prices and difficulty accessing scale-up finance as among the biggest barriers to growing business investment in the UK.
The summary of responses, seen by the Financial Times, also highlighted problems obtaining planning permits and with the way government interacts with business.
In its report the NAO found that the DBT was struggling to join up with other departments covering key areas of the strategy, such as “education, immigration, infrastructure, skills and taxation”.
“It is not clear how this is co-ordinated between departments, which has led to frustration from some businesses regarding which department can best support their needs.”
The NAO cautioned that the DBT was “not always able to exert influence over other departments”.
Relations with the Department for Education, which has responsibility for skills, were singled out as a problem. The DfE is due to publish its own Skills England strategy in the next few months, but there is “no formal working arrangement” for pushing through the DBT’s requests on skills.
“DBT therefore must wait for the publication of Skills England’s strategy to understand how sectors of the economy may be affected by skills policy, and what potential trade-offs will need to be considered between the departments’ objectives,” the report found.
Stephen Phipson, chief executive of Make UK, the manufacturers’ lobby group, said an effective industrial strategy would require an ambitious skills plan, competitive energy prices and pro-investment tax policies.
“While DBT will inevitably be the main driver of this aim, it is going to require every government department to be rowing in sync with each other,” he added.
Alex Veitch, policy director at the British Chambers of Commerce, said that although the DBT had taken steps to stitch together its internal business and trade functions, the NAO findings indicated there were still gaps when working with other departments.
“This report suggests it has been less successful in aligning cross-government priorities and understanding. It is vital it does this. The industrial strategy will only be a success if it can instil confidence in business and has funding to back it up,” Veitch said.
The NAO added that while the DBT was responsible for 32 initiatives to support individual industry sectors, it only had monitoring and evaluation evidence for 11 of these, leading to a shortage of data on which policies worked.
The watchdog’s findings were published after the government launched a drive to streamline Whitehall, including stricter performance targets for senior civil servants and “mutually agreed exits” for underperformers.
Sir Geoffrey Clifton-Brown, chair of the influential public accounts committee, said DBT was pivotal to providing joined-up support for industry but it was “not yet working effectively across Whitehall” to provide a unified voice for business.
The DBT said that growth was “at the heart” of everything the government did, and that “robust systems” were in place to evaluate grants.
“Our modern industrial strategy will prioritise the high growth sectors most promising for future prosperity, creating the right conditions for increased investment and ensuring a lasting impact in communities across the UK,” it added.
