Britain's Industrial Strategy: the Long View
29 Nov 2017
Professor Steve Cowley, Professor Sir John Beddington and Professor Sir Charles Godfray recently participated in a roundtable, held at the Resolution Foundation and hosted by Lord David Willetts, to consider the opportunities for British industrial strategy arising from the challenges of the 21st Century. The ideas in this piece are curated from the wide-ranging discussion that took place before and after that meeting, with input from a number of senior Oxford Martin School academics.
British Industrial Strategy needs to take the ‘long view’, both in terms of the so-called ‘grand challenges’ of the 21st Century, and in terms of our place in the wider world - a world that is already being shaped by forces of demography, urbanisation and climate change. Projections for future food, water, energy and raw material demand growth over the next 15-20 years are between 30% and 60%. In 2030, Asia will have around 4.9bn inhabitants, 3.3bn of working age. Africa will have around 1.6bn inhabitants, 800m of working age. Europe, in contrast, will have around 700m inhabitants, 460m of working age. This changing global balance, accelerating technological evolution, persistent low productivity growth – all of these are challenges which can be reframed to become opportunities for economic growth.
Figure 1: Global trends and global risks. WEF Global Risks Report 2017
Decarbonization is going to transform our energy and industrial processes. The move from fossil fuels to renewable energy is a move from a scarce stock to a distributed flows model, yet the location of the new energy capital stock (see for instance Figure 2), and its intermittence, will have fundamental influences on the geospatial and temporal distributions of energy production and the industries around it. That suggests a need to think carefully about the relationship between energy and industry within the UK, and also beyond. As the globe follows the UK’s lead to decarbonize, the industrial and political landscape may be fundamentally altered by the new distribution of energy resources, let alone the distributed nature of the control of its production.
Figure 2: Renewable energy potential of countries and regions. Source: Scholten & Bosman, 2016
The UK is one of the world’s trailblazers in the drive to realise the clean growth agenda, and this comes with many significant opportunities to boost economic growth. Our expertise, models and technology are all exportable. Decarbonization must also deliver rebalancing and productivity. The Industrial Strategy white paper's focus on construction must also be rooted in the low carbon future: that includes examining industry regulation and standards at not only the construction level but also at the product (for instance, cement and concrete) level to allow for innovative ‘green’ products that deliver equivalent or better safety standards together with lower emissions. And innovation must be rewarded, not only at the service and product level but also at the procurement level.
The challenge of technological innovation
The sheer extent of technological innovation as we are experiencing it, and at the rate it is being adopted, is truly a grand challenge.
Figure 3: Years until used by 25% of American population. Source: Singularity.com
Such disruptiveness makes adaptation difficult, and has ramifications for security in all levels of society. Rapid technological innovation also brings inefficiencies and distortions in interactions at the system edges. The ‘smart software / dumb hardware’ interface is one that will be encountered more and more, in many different contexts, from high-tech IoT systems in buildings and construction products, to the interfaces required in the implementation of self-driving networks across national infrastructure and public or private transit systems that may run on different models. Again, focusing on the AI, construction and automotive sectors is an opportunity for systems thinking about the infrastructure of the future.
In the near term, the beneficiaries of technological change are the market makers and moderators, and the owners of security and analytics capabilities – all areas where the UK has traditional strength and expertise, and which will likely be areas of demand for rapidly industrialising and technologically innovating countries with whom we trade.
The wider integration of engineering and data informatics is also an opportunity to address historic cross-sector low productivity growth. For instance, take agriculture, which has low productivity compared both to other sectors and to competitors abroad. The advent of precision agriculture is a promising opportunity, as are analytics for distributed ledger technologies. Enhanced agricultural equipment logistics and crop management improvements can also contribute to reducing CO2 emissions from the agricultural sector, one of the UK’s biggest emitters. Such fin tech approaches are also likely to improve transparency and authenticity both in food chains and in broader supply chains.
Threats and resilience
In the 21st Century, business models that effectively deal in ‘avoided costs’, respond to threats, or deal in sensitive intervention points (i.e., interventions in time or space with the most effective outcomes) are likely to be strong ones. This might include cybersecurity; pollution solutions; or innovations against antibiotic/herbicide/pesticide resistance. It also includes insurance, which historically has been an early adopter in seeking to price the risk around climate change and resource pressures.
Risks to infrastructure networks are increasingly important. Interdependent infrastructure system models allow the exploration of cascading and interdependent failures, and can be at such scale as to include regional and macro-economic impacts. Local models are just as important. In farming, for instance, local planning is particularly important not only because of increased weather variability but also because of the trend for farmers to rent rather than own large equipment. There will likely be a demand for integrated models of the farm, including hyperlocal weather forecasting , future monitoring of assets like soil carbon, and control of precision-farming machinery. Once again, the commercial beneficiaries in that scenario will include the providers of the software and analysis capabilities and the enablers of hardware integration.
The UK has established strengths in analytics and quantified risk analysis, and there are many opportunities to sell such analytics as a service at a global scale. Software and models that allow users to better understand risk – both in planning and in operations - is an area in which the UK is ahead of the curve in thinking of cross-infrastructure modelling. Large complex systems such as the National Grid, and understanding the impacts of (for instance) extreme weather, are defence-critical areas of activity.
Manufacturing and productivity (aka, Things and People)
Having an industrial strategy a priori implies a focus on manufacturing and productivity. Adding value to manufacturing industries in the 21st Century depends fundamentally on R&D. Amongst other opportunities to boost manufacturing, there are many within the life-sciences themselves. Engineering plants (and even livestock) to produce high-value chemicals and pharmaceuticals is a promising area.
The UK’s strengths in the life sciences are excellent, and can be secured for the future with further investment into training for biotechnology skills such as high-throughput sequencing, where we have world-class technologies. Sir John Bell’s proposal for a Health Advanced Research Programme (HARP) is timely. The initial opportunities identified there for genomics in medicine, diagnostics platforms for chronic diseases, digitisation and AI in pathology and imaging, all speak strongly to our society’s need to age healthily and equitably.
Leveraging invested capacity
Much of this discussion has focused on the UK’s significant intellectual capital. The UK also can benefit from past capacity investment into key industries - with some careful planning, these can evolve into the new industries of the future. For instance, our chemical industry makes catalysts that will be essential features in low carbon technologies and our historic expertise in offshore oil technology has already adapted into the space of offshore wind. With adequate investment to modernise the significant amount of R&D lab space and manufacturing plants, these valuable assets can help to keep us at the leading edge of manufacture and research in chemistry, materials, and biotechnology.
The importance of capacity mapping
Economic complexity analytic frameworks (such as that displayed in this data visualisation of what products are feasible for the UK to export ) underscore the need to understand regional areas of strength. Complex industries tend to behave as if they are networks, and one implication is that rejuvenation is problematic if the unconsidered aim is to leapfrog an area of low complexity into one of high complexity. The government aims to ensure that their Industrial Strategy affects every person in Britain: this sort of research can help in bringing that aspiration into reality.
The government’s Industrial Strategy white paper has been described as a “matrix” of themes and applications: the challenge now is to drive this theoretical framework of interdisciplinarity into application. Doing so successfully will seed innovation into our universities, our businesses, and into policymaking itself.
With thanks to Professor Sir John Beddington, (Senior Adviser, Oxford Martin School), Professor Steve Cowley (Director, Oxford Martin School), Professor Liam Dolan (Sherardian Professor of Botany and Oxford Martin Senior Fellow), Professor Nick Eyre (Co-Director, Oxford Martin Programme on Integrating Renewable Energy), Professor Sir Charles Godfray, Director, Oxford Martin Programme on the Future of Food), Professor Jim Hall (Professor of Climate & Environmental Risks & Oxford Martin Senior Fellow), Professor Cameron Hepburn (Director, Economics of Sustainability, The Institute for New Economic Thinking at the Oxford Martin School), Professor Sir Chris Llewellyn-Smith (Former Director of Energy Research, University of Oxford), and Professor Charlotte Williams (Professor of Inorganic Chemistry, University of Oxford).
For further information contact Dr Ella Adlen, Oxford Martin School via firstname.lastname@example.org
This opinion piece reflects the views of the author, and does not necessarily reflect the position of the Oxford Martin School or the University of Oxford. Any errors or omissions are those of the author.