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Sector-focused industrial strategy vital for economic growth, says CBI's John Cridland


The Government must focus on the creation of a sector-focused industrial strategy, the head of an influential business lobby group has said.

John Cridland, director-general of the Confederation of British Industry (CBI), said that the Government needed to work with businesses to "tilt the playing field" to support the sectors of the economy where the UK already had competitive advantages.

Speaking at a lecture organised by Pinsent Masons, the law firm behind Out-Law.com, Cridland said that the effective use of "policy and funding levers" was essential to allow the UK's manufacturing, creative and service sectors to compete globally.

"This is as much about service sectors where we have strengths as it is about manufacturing sectors where we're getting stronger," he said. "Our world-beating business and professional services, our world famous education sector, our dynamic creative industries experience very similar issues to the aerospace and automotive sectors."

"What's critical is identifying where a long-term partnership between business and government can make the greatest difference when it comes to encouraging investment and boosting exports," he said.

He said that although the Government would need to make "hard choices" ahead of next month's Spending Review, support for research and development and innovation was "a priority". In addition, the Government must do more to support medium-sized companies in the supply chain, he said.

In September last year, Business Secretary Vince Cable said that the Government would focus on "specific sectors" and develop a series of "collaborative but challenging" strategies including industry partnership and targeted support as part of a new industrial strategy for the UK. Likely disciplines could include aerospace, automotive and life sciences, education and professional and business services, he said at the time.

Cridland said that this approach was "long overdue" as a means of rebalancing the economy, with less of a focus on financial services and the City of London as the sole engines of growth and more of a focus on the UK's regional potential. However, he said that much of the policy work on industrial strategy was happening "below the radar"; away from more high-profile stories about the tax arrangements of multinational companies.

Earlier this month the CBI published its seven tax "principles" for UK businesses. The document states that businesses should engage only in "reasonable tax planning" that "does not lead to an abusive result", and emphasises the need for relationships between businesses and the tax authorities which are "transparent, constructive and based on mutual trust". The document also calls on businesses to "consider how best to explain more fully to the public their economic contribution and taxes paid in the UK".

Answering a question on business taxation following the lecture, Cridland said that companies had to "get better about communicating what they do" and "convince the public with their credentials".

The growth of the UK's automotive sector since the financial crisis, driven by the "strong leadership" of the Automotive Council, was a "pilot case that demonstrates how successful" a long-term, sectoral approach could be, Cridland said. The Government has also already taken some "positive steps" to improve the business environment as part of its more general growth agenda, including the gradual reduction of the headline corporation tax rate from 28% towards 20% by 2015, he said.

Cridland said that the proportion of the UK's exports going to countries outside of the EU was increasing, particularly to the BRICs (Brazil, Russia, India and China) and developing economies. However, he warned that although falling exports to the EU currently accounted for a "drag of nearly 1% on GDP", the "economic implications" of distancing the UK from the EU could not be overstated.

"Despite the European slowdown, our participation in the Single Market allows us excellent global positioning to sell our goods into emerging market economies," he said. "If we want to retain the benefits of the Single Market, we must find a new, reformed balance between Eurozone members who want to integrate further and those outside the single currency who don't."

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