This is what the government’s industrial strategy is really all about

Inside Business: With more dreadful figures published today, it seems the much ballyhooed initiative is designed to ensure no more manufacturing so people stop giving ministers a hard time about it 

James Moore
Chief Business Commentator
Sunday 23 June 2019 11:24 BST
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Car manufacturing in Britain is in the midst of a slump
Car manufacturing in Britain is in the midst of a slump (PA)

Britain’s industrial strategy was announced to much government fanfare and even more sceptical commentary some 18 months ago. Today the sceptics are in the ascendant.

This morning sees the release of NatWest’s new UK Automotive PMI report, produced in partnership with IHS Markit, which is behind the closely watched set of economic series covering services, construction and manufacturing in its entirety.

Awful doesn’t even begin to describe the numbers. The figure of 43.5 in May, with 50 representing no change, represents a sharp deterioration when compared to the 48.9 the compilers recorded in April, and indicates that the sector is in the midst of one of the sharpest slowdowns it has experienced in years.

It’s doing badly even when compared to the wider manufacturing sector, which isn’t exactly in the sunlit uplands itself. The sector-wide IHS Markit/CIPS figure for the same month spluttered in at 49.4, the worst since 2016.

This morning will also see BDO, the accounting and consultancy firm, releasing the results of a survey of manufacturers in which three quarters (74 per cent) of the respondents said they don’t think enough progress has been made with regard to the said “strategy”. Perhaps that’s because it isn’t really a strategy at all. It’s a PR stunt that involves a lot of waffle and precious little in the way of action.

BDO further says that many manufacturers feel that government claims of “record levels” of public investment into research and development, infrastructure and technical education have yet to have a significant, positive impact on their businesses.

Then there’s Brexit. Of course there’s Brexit. You can’t really escape it, especially when considering economic issues. It’s like your least favourite uncle who hogs the best armchair and talks loudly about his golf club when everyone else is trying to watch Netflix.

BDO says it’s hitting manufacturers twice over. It’s preventing progress from being made on the “strategy” while at the same time hitting order books and spreading uncertainty faster than chickenpox in a primary school.

It is largely responsible for the dismal IHS Markit figures I referred to, which have been hammered as a result of firms unwinding the stockpiles they built up before the last cliff edge.

They might soon have to build them back up because there’s serious talk of a no-deal Brexit again. It could, in a few short months, see goods travelling to Europe from the UK or supplies coming in from the other direction hit with heavy tariffs under the WTO rules Brexiteers keep telling us are marvellous despite all evidence to the contrary and made subject to long delays at customs when they used to flow freely and without friction.

Boris Johnson, who is likely to be embarrassing the country as its next prime minister in a depressingly short time, has talked about bringing back “fun”. Given what he’s been saying with respect to Brexit, his “fun” is everyone else’s nightmarish chaos.

Oxford Economics recently highlighted that a slowdown in global industrial activity has continued into 2019. The firm still expects production to rise this year, but there are an awful lot of risks and headwinds that could see that number revised downwards, notably the trade tensions between the US and just about everyone and the risk of, you’ve guessed it, a chaotic Brexit. It will, of course, hurt Europe. But it will hurt the UK an awful lot more. If it sprains the ankle of the former it will break both the latter’s legs and probably one of its arms.

Hang on, I think I’m beginning to get it. The government’s “industrial strategy” isn’t a PR stunt after all. It’s clearly been cleverly designed to ensure that we’re left with no more manufacturing in a few short years so people stop giving minsters a hard time about what a dismal job they’re doing when it comes to lifting up this important sector.

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