Sector deals for automotive, construction, life sciences and AI at the heart of new UK industrial strategy

Out-Law News | 27 Nov 2017 | 3:45 pm | 4 min. read

Special support has been outlined for businesses in the automotive, construction, life sciences and artificial intelligence (AI) industries operating in the UK.

The so-called 'sector deals' are aimed at boosting UK productivity and have been set out as part of a wider package of measures in a new industrial strategy (255-page / 15.5MB PDF) published by the UK government. UK productivity currently lags behind that of Germany, France, the US and Italy.

Further measures include plans to increase investment in infrastructure, such as transport, housing and telecoms, address the existing digital skills gap in the country, and provide additional funding and tax relief for research and development of new ideas and technology. Localised industrial strategies will also be developed, the government said.

"Our aim is that by 2030 we will have transformed productivity and earning power across the UK to become the world’s most innovative economy and the best place to start and grow a business, with upgraded infrastructure and prosperous communities across the country," the government said.

Employment law expert Neil Black of Pinsent Masons, the law firm behind Out-Law.com, said that it was not surprising to see the government focus on investment in infrastructure, skills and training, as well as "what the government sees as the key industries of the future", in a bid to "address the UK’s lagging productivity gap".

"A central strand of the strategy seeks to address the UK skills gap and news of investment in technical education will be particularly welcome across the manufacturing sector," Black said. "The UK’s provision of technical and intermediate professional is currently inadequate with OECD research suggesting that left unchecked the UK will fall to 28th out of the 35 OECD countries by 2020 in respect of such skills. The new industrial strategy plans to address this by establishing a technical education system to match the UK’s world leading higher education sector."

"The strategy also talks of increased focus on STEM subjects and, in a nod to the changing world of work, an increased focus on re-training existing workers to give them the skills needed by growth areas like construction and digital," he said.

To achieve the goals of the strategy, the government said the UK must embrace AI and "the data revolution" and "maximise the advantages for UK industry of the global shift to clean growth". It said it also wants the UK to become "a world leader in shaping the future of mobility" and "harness the power of innovation to help meet the needs of an ageing society".

The sector deals in automotive, construction, life sciences and AI "can create significant opportunities to boost productivity, employment, innovation and skills", the government said. It also said it is in "advanced discussions" with the creative industries, manufacturing and nuclear power industries, and is also talking to other industries too, over potential new sector deals.

The automotive sector deal contains measures to support the development and commercialisation of electric, connected and autonomous vehicles (CAV) by strengthening the UK's supply chain.

"The transition to ultra-low emission and CAV presents an opportunity to maximise the economic benefits to the UK supply chain," the government said. "We are committing to rolling out an industry-led supplier improvement programme that will target areas where businesses need to improve to match the best in Europe. The programme will provide bespoke training and enhanced business processes to help build the vertically-integrated supply chain we need in the UK to manufacture the future generation of vehicles at volume. This will support the sectoral ambition to increase the level of UK content in nationally produced vehicles to 50% by 2022."

The life sciences sector deal will involve close collaboration between industry and the NHS, support for life sciences 'clusters', the establishment of new digital innovation hubs, and a new research initiative, Health Advanced Research Programme (HARP), aimed at "finding solutions to the major healthcare challenges of the next 20 years. Pharmaceuticals giant MSD is to open a new research facility in the UK "focused on early bioscience discovery and entrepreneurial innovation", which the government said was an endorsement of its new strategy.

A new procurement model is to be developed as part of the construction sector deal, the government said.

It said: "In the months ahead the sector and the government will work to ensure construction projects across the public and private sectors are procured and built based on their whole life value, rather than just initial capital cost. The sector will aim to develop a procurement standard and work with the Infrastructure and Projects Authority to develop cost and performance benchmarks for assets and contractors and monitor outcomes including increased housing capacity, productivity and pre-manufactured value among other initiatives."

The government and industry will also work together and invest in developing and commercialising "digital and offsite manufacturing technologies", it said.

"This will accelerate change in the infrastructure and construction sector, ensuring new technologies that can help deliver the government’s planned investments in infrastructure and our 2015 commitment to deliver a million homes by the end of 2020 and half a million more by the end of 2022 are commercialised as quickly as possible," the government said.

Specialist in technology contracts Simon Colvin of Pinsent Masons said the industrial strategy shows that the government wants technology to "help drive and improve UK industry". He highlighted the importance of harnessing the power of data in this regard.

"For infrastructure players we know that agreeing data requirements and development of new interfacing and data management standards is seen to be a hurdle and was identified in our ‘infratech’ research as the second biggest challenge for projects where technology and infrastructure are integrated," Colvin said. "This is something that government will need to consider, as clear leadership will be needed to ensure that data and information security regulations keep pace with the changes in technology and proliferation of data in order for the benefits of infratech to be fully maximised."

"We anticipate data monetisation will become a more significant feature for infrastructure projects, particularly once the opportunities and risks are better understood by the 'infratech’ ecosystem, and robust data sharing arrangements and data standards are in place to support emerging business models. Across our global markets, we are seeing interesting PPP models emerge that incorporate data monetisation, and the profits arising from it, as part of the financial base case, so the success of the project will depend on revenue streams from data generated by project assets," he said.

"This underlines the views of the investors, which were articulated in our infratech research, that there are new revenue streams and value to be driven out from this digital and data transformation," Colvin said.

The government had consulted on its plans for a new industrial strategy earlier this year. It said it received nearly 2,000 responses to the proposals.