Concern: DS Smith boss Miles Roberts
As I’m sure is the case with many readers over the past few days, I have been reading with interest the manifestos of the major parties to see how their promises are likely to shape the next five years.
I have done this on a personal level, but also as CEO of DS Smith, a FTSE 100 company with a proud UK heritage.
I am particularly interested in plans for an industrial strategy and how this can generate much-needed economic growth.
The success of large manufacturers like DS Smith is based on investing sustainably over the long term.
When we decide what to spend on new facilities or technologies, we are looking 20 to 30 years into the future, so we need to know that we can rely on policies that not only create the right conditions for investment, but are also sufficiently forward-looking.
And we are not alone. All British businesses are crying out for a long-term national industrial strategy that will underpin higher levels of investment and growth.
Given the unparalleled challenges of the net-zero transition, such a strategy must be supported by an ambitious industrial decarbonisation plan.
Many of our overseas competitors have been implementing their plans for years, and that means the UK is behind the curve.
In this Parliament, while it was positive to see progress such as the Energy Bill Relief Plan in response to the scale of the energy challenge caused by the war in Ukraine, it was a short-term response.
Energy costs for manufacturing in the UK have been and remain substantially higher than those in continental Europe.
This, coupled with the lack of a long-term industrial plan and uncertainties about the regulatory environment and divergence with Europe, have continued to deter companies from investing in the UK.
As we navigate our way through the macroeconomic effects of Covid-19 and the war in Ukraine, this has hampered much-needed growth.
But why focus on the manufacturing sector in particular? The UK is often described as a “service economy” and the merits of fintech are much lauded, but the UK’s manufacturing sector accounts for around half of our exports, two-thirds of R&D spending and employs around 2.6 million highly skilled people across the country.
Everything you touch or consume, at home or at work, has its origins in manufacturing. It is therefore crucial that any new approach recognizes the fundamental importance of manufacturing to the British economy.
Without a doubt, in the last decade advanced manufacturing has received a lot of attention from the Government.
However, the next administration must recognize the benefits that manufacturing as a whole brings.
What’s more, I firmly believe that a new strategy must be unabashedly aimed at achieving a green reindustrialisation of Britain.
The combined challenges of the net zero transition, historically low growth, and increasing global competition leave governments with a clear need to partner with businesses to find solutions that work.
Whoever is in power at the end of next week, the idea of forming an industrial strategy association or council to provide specialist advice to the Government on a statutory basis is undoubtedly a good one.
As a major employer, cog in the supply chain and producer of fibre-based packaging, our roots are in the UK and we believe passionately in sustainability.
But as things stand, the lack of clarity over energy sources is deeply problematic. We need to know where the government will place its bets: what will be the UK’s new energy sources?
For example, will it be nuclear energy, hydrogen or biofuels? And where will this be generated, in what time frame and with what connections and pipes? That’s what we need to make investment decisions.
None of this happens alone. Success will come from a strategy that is implemented between the government and a variety of industry players.
If the next government, in whatever form, can give us clarity on where and with whom these partnerships will be made, then I am sure investments between a range of relevant parties will follow.
Without a forward-looking green industrial strategy in line with the historic packages announced by US and EU policymakers in recent years, along with long-term certainty on the direction of regulation and alignment with our European partners, the UK risks quickly falling behind, particularly on green technology and energy security.
With guidance, businesses can meaningfully assess what investment in the UK might look like.
For our part, DS Smith has already invested record amounts in low-carbon facilities in Italy and Poland, and in greener technologies in Germany, France and Spain, because we have ambitious decarbonization targets and the industrial and energy policy frameworks in those countries are clear.
But for now, the UK cannot chart its route to Net Zero or explain why it is an attractive place to invest.
Pace and agility are important. I am sure I am not alone in looking forward to finally seeing concrete proposals, and while we do not have the purchasing power of the US or the EU, we have numerous strengths that we can and should build on.
The sooner Thursday’s winning party accepts this, the better for the UK.
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