Topic 7: UK Industrial Strategy

Question 1

a) Rationale for intervention

Answer 1

should always be justified by reference to market failure

Question 2

a) Industrial Policy =

Answer 2

public intervention to change the distribution of resources across economic activities (Caves 1967)

Question 3

a) Industrial policy more prevalant in

Answer 3

developing and emerging economies

Question 4

a) Industrial Policy is generally an element of

Answer 4

inward oriented strategy (eg India, Tanzania) but can feature in outward oriented strategy (eg South Korea, China)

Question 5

b) horizontal intervention definition

Answer 5

support all (or most) activities)

Question 6

b) horizontal intervention aims (3)

Answer 6

To promote research and development, innovation and its diffusion; promoting productivity growth

Question 7

b) horizontal intervention best for

(6 examples) PRINTT

Answer 7

Often public goods or merit goods, where market fails completely, or under-provides

Pure public goods
R&D subsidies
ICT networks
National security
Transportation networks
Training and education subsidies

Question 8

b) selective intervention definition

Answer 8

promote activity in one industry relative to others

Question 9

b) selective intervention: two details

Answer 9

Actively shapes resource allocation across activities

Intended to deal with market failure and promote innovation and productivity growth

Question 10

b) selective intervention justifications (4) IPEA

Answer 10

Infant industry protection
Promoting competition
Export promotion
Agglomeration development

Question 11

c) horizontal policies 1950-70s (3) IRE

Answer 11

• Investment subsidies
• R&D subsidies
• Employment subsidies (Selective and Regional Employment Premium)

Question 12

c) selective policies 1950-70s (3) PNT

Answer 12

• ‘Picking winners’ (aircraft, shipbuilding, motor vehicles)
• National Enterprise Board (extending public ownership of industry)
• Tariff policy

Question 13

c) changes in horizontal vs selective policy 1979-2010

Answer 13

Selective policies largely abandoned

Horizontal policies shifted to more market based intervention

Question 14

c) list six changes 1979- 2010 CRIIES

Answer 14

4) Changes to trades union legislation
1) Rebalancing of direct and indirect taxation
5) Investment in education
6) Investment in basic R&D
3) Extensive privatisation of public sector utilities and businesses
2) Strengthening competition policies

Question 15

d) Ratiomale for Plan for Growth

Answer 15

Over last decade economy has become unbalanced and indebted
Marked decline in competitiveness
BUT:
UK has intrinsic strengths to build on
Appropriate policies should leverage those strengths
Need targeted Government intervention

Question 16

d) perceived intrinsic strengths (6)

Answer 16

Openness to international trade
(UK top 10 exporter and importer )
Openness to inward investment
(UK biggest host to inward FDI in European Union)
Strength of research base
Credibility of institutions
(Stable governance, independent Central Bank)
Strength of services sector
(Especially in pre-eminence of London as financial centre)
Language

Question 17

d) New approach to industrial strategy: Creating a framework for industrial development via: (4 points)

Answer 17

Access to finance
Partnerships within and between sectors
Support for emerging technologies creating a pipeline of skilled workers
Government procurement and the development of supply chains
Devolution of powers

Question 18

e) 1: Big Data

Answer 18

90% of world’s data created in past 2 years

90% of smartpohne chips use british technology

Question 19

e) 2: Satellites

Answer 19

40% of world’s small satellites produced in UK

8.2bn£ added to UK economy by space industries

Question 20

e) 3: Robotics and autonomous systems

Answer 20

• UK researchers developed radar technology enabling cars to self-drive
• UK has created tiny robots used to pinpoint diseases in body

Question 21

e) 4: Synthetic Biology

Answer 21

• UK developed method for copying DNA 10 thousand times faster
• synthetic biology market expected to reach £62bn by 2020

Question 22

e) 5: Regenerative Medicine

Answer 22

• UK company testing injection of stem cells to restore brain damage caused by strokes
• UK have reversed paralysis in dogs using stem cells
• 15,000 jobs by 2020

Question 23

e) 6: Agri-science

Answer 23

• UK: reduced amount of water to grow strawberries by 80%
• 80% of breeding chickens come from UK developed genetic stock
• food production largest single manufacturing sector in the UK

Question 24

e) 7: Advanced materials

Answer 24

• British discovered graphene strongest, thinnest material known
• UK produces bone replacement material used by surgeons worldwide

Question 25

e) 8: Energy storage

Answer 25

• up to 10% of UK energy from wind, storage for when not windy
• developing batteries that can reduce electricity consumption by one fifth

Question 26

e) Witty review… ( 4 points)

Answer 26

Proposed series of publicly funded interventions to drive cooperation between Universities, business and Local Economic Partnerships
‘Arrow Projects’ to leverage the potential of the eight great technologies at heart of industrial policy
Strategy aiming to support selective activities, with horizontal intervention
Strategy not geographically focused

Question 27

e) current strategies of UK gov (5 points)

Answer 27

Changes to Corporation Tax (down from 23 to 20% at top rate)
Incentives to promote R&D (eg Patent Box, reduction of tax on patents to 10%)
Significant infrastructure investment (eg HS2)
Eight Core Cities promoted (including Nottingham)
Enterprise Zones created (including one in Nottingham)

Question 28

e) steel

Answer 28

down 350,000 to 38,000 1967-94