Last month the government announced the next wave of places set to develop local industrial strategies, joining trailblazers like Greater Manchester and the West Midlands.
Policymakers in these places and elsewhere could be forgiven for feeling a degree of strategic planning fatigue. It’s a long time since places were tasked with developing strategic economic plans in return for access to the local growth fund.
Given this, how can local leaders ensure that the local industrial strategies are not simply repetitions of previous strategies? How can they build on what’s worked in previous local economic plans, while avoiding the potential pitfalls that can arise?
The What Works Centre for Local Economic Growth has published a new report to help places address these questions and make the most of local industrial strategies. It draws on our comprehensive evidence base, academic insights, and in-depth discussions with local and combined authorities, local enterprise partnerships and central government.
The report contains a wide range of ideas, but here are five to start:
- Build on current strengths – but think about how your economy might evolve
Places need to find a balance between fostering new ideas and supporting existing economic activity, while working with existing and potential employers. The trade-offs involved in these decisions were illustrated by Luton BC’s recent £3.2m investment package with local employer Peugeot to help save the town’s Vauxhall van factory.
While this may safeguard the factory’s 1,400 jobs for now, it comes with the opportunity cost of not being able to spend as much on other activities. A good local industrial strategy will help areas understand the trade-offs and prioritise future investment.
- Beware expensive economic modelling
In our conversations with local leaders, we’ve heard stories about places spending considerable money on complex economic models, which supposedly predict the future impact of different policies.
But we worry that these models are invalid, offering little insight on the likely effect of many policies. Scenario planning is likely more useful in the local industrial strategy decision-making process to structure thinking about the future economy, identifying trends, risks and uncertainties.
- Don’t assume if you build it they will come
It can be tempting for local leaders to focus on grand projects – from new buildings to eye-catching transport schemes – as they offer visible, immediate impact that many longer-term initiatives don’t.
However, these projects often assume demand from firms will follow supply, when in many cases the reverse is true.
To mitigate the risks involved in supply-side initiatives, particularly in the case of shiny new buildings, places should ensure that investment builds on existing or potential economic strengths which have been credibly analysed and assessed. Wishful thinking is unlikely to deliver a good return.
- Don’t prefer one sector or employer without wider economic benefits
If a business or industry is a large part of the local economy, policymakers can be understandably inclined to prefer them in local industrial and other strategies. But it’s important to consider who benefits. Will the intervention only help that firm or sector, or will it have a broader positive effect?
For example, does that large employer in your area train workers who go on to work for other businesses? If the answer is yes there might be a good case to consider support. If not then support is harder to justify, and you might want to consider something more general.
- Experiment and evaluate – then share your findings
One of the aims of the local industrial strategy is to find new and improved ways for policy to boost growth.
As the government has recognised, this means there is a risk that some projects fail. Places should boldly experiment to find more cost-effective ways to support economic growth.
Embedding thorough evaluation at the heart of policy design from the start will be crucial in assessing the success of these policies. It’s also vital that places share learning with peers so that other areas can benefit from what works and avoid blind alleys in their own policymaking.
The report contains many other suggestions. None of these ideas are brand new, but they should help places properly analyse their local economy, understand where interventions are needed, and consider the best policies to adopt.
All these factors will be crucial in delivering local industrial strategies that really tackle the economic challenges and opportunities that places face.
Henry Overman, director, What Works Centre for Local Economic Growth and professor of economic geography, London School of Economics