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Formulating Industrial Policy

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  • Besley, Tim
  • Davies, Richard

Abstract

Alongside the challenge of maintaining economic competitiveness in the face of great uncertainty, Brexit brings an opportunity for the government to set out a new industrial strategy. The case for doing so rests on the need to address areas of persistent structural weakness in the UK economy, including low productivity. But it is important that any new industrial strategy be based on appropriately granular data reflecting the real structure of the UK corporate sector: the overwhelmingly preponderant role of services as opposed to manufacturing, for example; the importance of young, fast-growing firms as opposed to SMEs; the relatively high failure rate of companies in the UK; and the relative lack of successful mid-sized firms. Such a data-driven approach might spawn an industrial strategy quite different from the piecemeal programmes of recent years. Internationally, the UK is a laggard in this area, and the recently-created Industrial Strategy Council does not look strong enough to change that position. To move forward, the government needs to make industrial strategy a central plank of economic policy, embedded at the heart of the administration with its own staff and funding, and operations based on a comprehensive review of the economic contribution and potential of various types of firm. Needless to say, it cannot be a substitute for a continuing commitment to competition and markets, or a stalking horse for protectionism: interventions should be justified by carefully-argued market failure arguments, be time-limited, and transparently evaluated.

Suggested Citation

  • Besley, Tim & Davies, Richard, 2019. "Formulating Industrial Policy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 250, pages 47-53, November.
  • Handle: RePEc:cup:nierev:v:250:y:2019:i::p:r47-r53_17
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    1. John Haltiwanger & Ron S. Jarmin & Robert Kulick & Javier Miranda, 2016. "High Growth Young Firms: Contribution to Job, Output, and Productivity Growth," NBER Chapters, in: Measuring Entrepreneurial Businesses: Current Knowledge and Challenges, pages 11-62, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Bart van Ark & Anthony J. Venables, 2020. "A Concerted Effort to Tackle the UK Productivity Puzzle," International Productivity Monitor, Centre for the Study of Living Standards, vol. 39, pages 3-15, Fall.
    2. Bart van Ark & Venables, 2021. "A concerted effort to tackle the productivity puzzle during the post-COVID era," Working Papers 001, The Productivity Institute.

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