Agenda item 2: the UK’s industrial strategy discussion paper

SPC Members are asked to 

• note the contents of this paper including the development of a joint delivery plan with UKG
• note further details will be provided with respect to an engagement plan currently being developed
• share initial views on the key opportunities and risks the Industrial Strategy presents for Welsh businesses, the workforce and place

1. The key aim of the UK Modern Industrial strategy (IS) is to increase business investment, capturing a greater share of internationally mobile capital, spurring domestic businesses to scale up, and supporting small and medium-sized businesses reliant on resilient supply-chains. There is a key focus on the eight sectors with the highest growth potential (the IS-8) and the IS sets out how the public finance institutions and major funding pots will be ‘tilted’ towards these sectors and UK City Regions/clusters where they are located. 

2. Welsh Government (WG) has had positive engagement with the UK Government during the policy development process with respect to the IS. The UK Government agreed with our evidence-based assessment that there are four high growth sectors in Wales (Advanced Manufacturing, Clean Energies, Digital and Technologies, and Creative); and two high growth potential sectors (Life Sciences and Financial Services). 
    
3. We also agreed with respect to taking a place-based approach and ensured that Port Talbot was clearly articulated as an area which required a joint UKG and WG response. There are however potentially significant opportunities across Wales, and the publication of the strategy marks a beginning, not the end, of our work with UKG to maximize the economic benefits for Wales.
    
4. All the remaining sector plans have now been published and over the next few months we will be continuing to engage with UKG on the detail of each sector plan with respect to the implementation and the development of a joint delivery plan which will highlight key priorities with the aim of maximising the opportunities and accelerating delivery in Wales.
    
5. Alongside this we are working closely together on several complementary strategies, including those on steel, infrastructure, SMEs and trade to understand these developments and to identify opportunities for alignment.  

6. Our principal business representative organisations (BROs) – CBI, Make UK, FSB alongside our other business representative organisations recently met ministers and senior officials to share their views on the IS. 
    
7. The consensus among these BROs is that Wales is in a stronger position relative to the other devolved nations and should benefit from measures in the IS, with its focus on the new Strategic Sites Accelerator, a Defence Growth Deal cluster, an AI Growth Zone, and continued backing of the City and Growth Deals. All stakeholders recognise this was helped by WG’s positive engagement with UKG. 
    
8. Further engagement is now taking place with UK Government to focus on delivery. This will involve further work with partners and stakeholders to focus on sector plans and a place-based approach. 

9. Significant progress on the delivery of our Economic Mission has been possible due to our positive engagement with the UK Government enabling us to influence the IS to support Welsh priority outcomes. 
    
10. Investment in the high growth industries identified in the IS will clearly have positive benefits in terms overall productivity levels and job creation for the short, as well as the longer term. We appreciate that stakeholders will be waiting to see how the IS will be implemented; what are the ‘quick wins’ for Welsh businesses, and how will they fit into the bigger strategic picture.
     
11. The UK Government’s IS and its Employment Rights Bill work hand in hand.  While the Industrial Strategy sets out how to grow the economy and boost productivity, the Employment Rights Bill provides the legal changes needed to make sure that growth benefits workers by delivering fairness, job security, and respect at work.  
     
12. Together, they offer a joined-up approach that supports businesses and workers. They aim to make work pay and reduce insecure employment.  For Wales, this connection strengthens our own efforts to use the tools we have, to put fair work at the heart of our approach to economic development and business support.
     
13. There are however obviously key issues which the IS has not addressed namely, the foundational economy, the rural economy, tourism, retail, construction and food. It is important that partners work together to ensure they are supported and understand how successful delivery of the IS will benefit them. The UKG launched its plan for Small and Medium Sized Businesses which sets out further actions related to these sectors. 

14. Freeports and investment Zones (IZ) are clearly aligned to our placed based discussions with UKG. They are now being managed jointly under the banner of “Industrial Strategy Zones”. An Action Plan has been developed (which includes input from WG). This sets out an ‘offer’ for the Freeports and IZs from both Governments to support the success of each programme. There are opportunities to lever more UKG support for these places building on those commitments.
     
15. Celtic Freeport: covering Port Talbot and Milford Haven with a focus on the Celtic Sea potential to benefit from the UK’s drive for Floating Offshore Wind (FLOW) energy generation, but potentially with respect to other sustainable fuels. Related UKG port infrastructure funding (£80 million) should complement this ambition to catalyse and accelerate the development of enabling infrastructure for offshore energy. The challenges here include misalignment of timings, securing necessary grid connections as well as securing planning and marine licence consents. 
     
16. Cardiff-Newport Investment Zone: the South-East is highly represented in the IS (including the IZ). It is a diverse economy with significant contributions from sectors such as an expanding tech and digital sector, finance and professional services, manufacturing, technology, and creative industries. There is also ongoing investment in infrastructure and development projects, such as the Cardiff Capital Region City Deal and Shared Prosperity Fund.
    
    There is no shortage of opportunities for investment and there will need to be a focus on coherence and additionality to ensure various programmes and investments complement each other and contribute to a coherent plan. There are also risks of complex governance and delivery arrangements from a multitude of different funders.
     
17. Wrexham-Flintshire Investment Zone: the region has a strong manufacturing base, particularly in advanced manufacturing, including defence and aerospace. Companies such as Airbus and other engineering firms contribute significantly to the local economy and provide high-skilled jobs. It is home to various research and innovation centres that promote collaboration between academia and industry. There has been good progress with the IZ, with the Corporate Joint Committee (CJC) building capacity, strong industry engagement, and a pipeline of investments linked directly to industry need. 
    
    There are opportunities to accelerate the Growth Deal alongside the Investment Zone for cumulative effect and wider regional benefits, including cross-border. Principal risks for the IZ include planning consents in Wrexham (issues associated with Local Development Plan adoption), nutrient neutrality, and access to the grid. 
     
18. Anglesey Freeport: Freeport status and tax reliefs could potentially attract a range of industries, particularly with respect to energy production e.g. nuclear and marine opportunities. The Prosperity Parc planning permission decision is imminent for the technology park on the Freeport tax site, which will incorporate a number of modular data centres. WG will need to monitor closely to ensure this develops in the way envisaged to deliver on the benefits of a technology park (and potential AI growth zone) rather than solely data centres. 
    
    Opportunities exist to demonstrate Small Modular Reactors (SMR) technology in the area for the purpose of providing consistent and significant levels of electricity for data centres. Effective engagement with stakeholders across the wider North Wales region will be critical to ensure job creation, benefits and opportunities extend beyond Anglesey.

19. Welsh Government has had a positive input into shaping the IS and is well placed to benefit from the opportunities it presents in terms of high-quality jobs and growth. Further work is required with UKG to confirm the detail and agree a plan of action. The Social Partnership Council could provide valuable input into our work on that plan, and I would welcome a discussion on the opportunities and risks as mentioned in this paper and their impact on the workforce. 

The content of this paper does not raise any specific EDI issues.  However, there could potentially be significant consequential impacts on businesses and the workforce as the IS is implemented.