In its response to the Business and Trade Committee’s call for evidence on the proposed Industrial Strategy, ICAEW argues that its aims cannot be achieved without coordination across government departments and policies.

“Done well, the Industrial Strategy will make a large contribution to growth by focusing interventions on certain parts of the economy, but other elements of policy are crucial too, such as tax,” says Iain Wright, ICAEW’s Managing Director, Reputation and Influence. “All parts and activities of government must align to the task of growth.” 

Long-term view and sector focus

In its response, ICAEW welcomed the government’s intended 10-year timeframe for the Industrial Strategy and supported the focus on key sectors. The long-term perspective, it says, could help to “reduce policy churn” and provide the private sector with the confidence to invest and innovate. 

Meanwhile, the sectoral focus was seen as playing to the UK economy’s strengths. The Industrial Strategy identifies eight growth sectors, including professional and business services, although ICAEW has suggested that higher education should also be included. “The UK is on par with the US for the excellence of our universities,” explains Wright. “Alongside generating economic activity in their own right, their research and innovation, when applied and commercialised, can produce significant benefits for the whole country.”

ICAEW also called on the government for clarity on exactly what financial support would be made available alongside the Industrial Strategy. While acknowledging the challenging fiscal environment, the response highlights key sectors, including advanced manufacturing, which need state investment to compete globally.

Bigger picture view and policy alignment

ICAEW argues that supporting specific sectors doesn’t mean that the Industrial Strategy shouldn’t consider wider trends that are impacting organisations across the economy, including the adoption of artificial intelligence, the transition to net zero and ageing populations.

These issues, along with ‘horizontal’ policies – such as skills, infrastructure, energy and transport – highlight the vital importance of the Strategy aligning with the government’s wider economic policies. ICAEW argues that these aren’t issues that an industrial strategy can address by itself. 

“If the government is to secure its mission to ‘kickstart economic growth by securing the highest sustained growth in the G7’ then it needs to unleash a revolution in its approach to incentivising investment and growth,” says Wright. “The introduction of an industrial strategy is part of that approach and should make a significant contribution. However, it is not the full answer.”

ICAEW’s response highlights the proposed changes to funding for Level 7 apprenticeships as an example of a policy approach that runs counter to the government’s growth agenda. 

“Such a measure for apprenticeships in sectors, such as law, accountancy and consultancy, will compromise growth plans, particularly for smaller, regionally based players,” warns Wright. “We are concerned that this is an early indicator that industrial policy will not have appropriate coordination of decisions taken across government.”

Tackling the tax burden

The response also highlights the need for government to consider the implications of taxes on their growth plans – both within the Industrial Strategy and at a broader economic policy level.

ICAEW members and communities continue to highlight the “tax burden” as a challenge to growth. In the latest edition of the Business Confidence Monitor (Q4 2024), a record number of businesses cited the tax burden as one of the significant challenges to their business performance. Members said increases to employers’ national insurance contributions were a specific disincentive to growth. 

Recent online polls by ICAEW suggest this sentiment is not changing. More than half of those responding to a LinkedIn poll in February cited the tax burden as the main obstacle for growth in the UK.

Meanwhile, 69% of those responding to a survey on icaew.com agreed that the tax implications of expanding was holding back growth in their business or those of their clients. When asked what tax areas were seen to be the greatest challenge, employment taxes were said to be discouraging the hiring of additional staff.

In its response to the Business and Trade Committee, ICAEW highlights the feedback from its members overseas who confirm that other countries are prioritising measures to enhance the competitiveness of their tax regime alongside embracing deregulation. 

“We’re not suggesting a ‘race to the bottom’ on tax rates or on regulation,” stresses Wright. “But it is important that economic policy needs to consider the burdens arising from taxation, including in its administration and proportionate regulation. Industrial strategy, as a component of economic and business policy, needs to reflect this.”