Productivity and Industrial Policy by Design: The UK Experience

The number of industrial policy interventions and the scale of the public expenditure involved is on the increase globally. The United Kingdom has a history of churn with respect to industrial policies, and has largely been averse to policy activism in this area since 1980. This article presents case studies of three UK sectors– life sciences and pharma, financial services and the creative industries– arguing that despite the anti-activism policy rhetoric for much of the past four decades these have experienced sectoral industrial policies ‘by accident’, involving classic policy tools used without a strategic framework. Policies affecting business decisions cannot avoid having an impact; acts of omission are policy choices, just as much as positive decisions. We argue that, although counterfactual outcomes are necessarily speculative, productivity outcomes would be better if policies impacting key sectors of the economy were developed by design, due to improved policy co-ordination, derisking of investment and more effective realization of spillovers.