The Government’s Industrial Strategy White Paper has tech at its core, but what opportunities does it actually present for tech companies?
Monday saw the announcement that people have been waiting for, a perfect match that weds together the old and the new world. No, not the wedding of Prince Harry and Meghan Markle, it was of course the launch of the Government’s Industrial Strategy White Paper.
It may have been knocked off the headlines by the news of the royal engagement, but the second phase of the Industrial Strategy is certainly something worth celebrating for tech. It shows, quite clearly the commitment of the Government to putting tech right at the heart of its strategy for economic growth. On almost every one of the document’s 255 pages there is a reference to the importance of new technology and innovation.
That is not to say it is all new. Most of the funding commitments contained in the paper were announced in the Budget last week (which you can read about here). The overall approach, which seeks to bring together industry, academia and Government behind a common strategy, is also unchanged from the original Green Paper, meaning few real surprises.
But if the money isn’t (in most cases at least) new, then at least the paper sets out the whole-economy vision of the Government and the proactive next steps that they will be taking to deliver an economy ‘fit for the future’.
The Sector Deals
The Industrial Strategy Green Paper, introduced the concept of Sector Deals, asking industries to come together and agree a package of support with Government. There has been some criticism of this approach since it was announced, primarily around uncertainty about what funding and support is on offer, but the of engagement from Government has shown a clear desire to listen to business needs and work together to deliver them.
techUK has consistently said digital technology should be embedded into every sector deal. There is no doubt that the success or failure of businesses and sectors will depend to large part on their ability to adopt, adapt and absorb the benefits of digital innovation. Remaining globally competitive will require the acceleration of the digitisation of our economy as a whole. It is therefore very welcome that the sector deals announced in the White Paper all have significant tech elements.
This sector deal is focused on development of new treatments and medical technologies. The deal contains a number of tech elements, but perhaps the most significant is the focus on data. The deal contains a commitment to “develop a number of regional Digital Innovation Hubs” to help create a controlled environment for using NHS data in clinical studies. As a national, free at the point of care health service, the NHS is in a unique position globally to make use of data to improve the lives of its citizens while fostering a thriving health technology sector. Unlocking this data is a good example of how Government can support the next generation of expert-led research and development.
For Medtech, opening up the ability to examine anonymised and pseudo-anonymised NHS data is key to innovation. The NHS is a data resource that few other countries have and can be of huge benefit to the development on new, often life-saving treatments.
Building smart infrastructure is key to reinvigorating the nation’s productive capacity. The sector deal for construction will undoubtedly have an impact on the roll-out of new, tech enabled homes, public buildings and transport infrastructure. A new commitment to invest in transformation that “brings together digital technology, manufacturing, materials and energy sectors to develop and commercialise digital and offsite manufacturing technologies” will present an opportunity for tech companies. References to allowing construction companies to “make best use of funding from the Apprenticeship Levy” also echoes hints in the budget of changes in the way the funds work for all businesses sectors. While no policy has yet been announced in this area, it is another sign of the Government paving the way for possible changes to the system, something techUK strongly supports.
The announcement of a sector deal on AI is of course a welcome aspect of the strategy. A bespoke deal on this growth area will help unlock the opportunities that AI presents across the economy. The package includes the creation of a new Office for Artificial Intelligences, the Tech City expansion to become Tech Nation, and a new GovTech fund, as well as referencing the £45 million announced in the budget to support PhDs in AI and related disciplines. The sector deal should leave little doubt in the Government’s decision to commit significant resources to making the UK into the home of AI world-wide.
This is another sector where tech is playing an increasingly large role. The line between automotive and tech has been blurring for some time, with new competitors such as Google and Tesla challenging the likes of BMW and Ford in the race for autonomous vehicles.
The sector deal focuses on making the UK home of connected and autonomous vehicles, which will be supported through the MERIDIAN hub. Also of interest to tech is the commitment to boosting automotive supply chains. The tech knowhow employed by automotive companies is a key part of their production and often comes through smaller bespoke tech businesses. With challenges to come due to Brexit and the potential of Rules of Origin requirements (which mean a certain percentage of a car must be made in the country from which it is exported), the White Paper sensibly recognises the rapid need to bolster UK supply chains for the sector.
Deals not yet done
In addition to the formal announcements of the new Sector Deals, the White Paper also notes a number of industries where a Sector Deal is almost ready. These include the Creative Industries and the Nuclear sector, both of which are likely to include significant tech elements. The list also highlights the industrial digitisation and Made Smarter Review, which is likely to be turned into some form of deal, focused on take-up of technologies. In so far as tech holds its own sector deal (alongside playing a role in digitising every other sector), this is the right target, though again, the focus on the newest technologies risking missing a crucial gap in the basic digitisation needs of many smaller businesses.
Another major step in the White Paper is the announcement of the next areas for the Industrial Strategy Challenge Fund. Originally announced as part of the Green Paper, the previous challenge funds focused on issues such as the manufacture of batteries, electrification of vehicles and future satellites. The next round unlocked £725 million for cover three additional areas:
This new fund include £170 million for transforming construction, which will be of interest to those involved in connective homes, and a further focus on green energy in general. Smart systems are seen as the key to reducing energy consumption, and so the fund sets out the need to develop these world leading technologies. The fund also captures the importance of transforming food production. techUK has championed greater use of AI and machine learning in areas such as precision seeding utilising geo-mapping technologies and look forward to further developments in this area.
AI and data
Again AI is put at the heart of the Government’s approach, with two separate challenge funds totalling £33 million and £20 million respectively. The first challenge focuses on the use of AI in areas such as visual arts and augmented reality. Given the UK’s strong tradition of creative industries this is an area we are well placed to succeed. The Second fund looks at businesses logistics, and the role that AI and data can play in developing these services. With increased demand for ‘just-in-time’ goods and services, the roll-out of tech to enable smoother processes can help businesses save money while also providing improved customer experience and so its inclusion is a very welcome part of the addressing the productivity puzzle.
The final challenge fund area is for aging and health. With AI and machine learning holding huge potential for diagnostics, and robotics contribution to already lifesaving treatment, it is welcome the Government recognises the value of expanding this work even further. The challenge fund includes £210 million for projects concerning using data to enable early diagnosis, and well as a separate challenge around supporting ‘healthy aging’ to reduce social care needs among the ageing population.
There are a number of other developments worth noting with the White Paper, including a new Minister-led review into Govtech and Regtech to help utilise new technologies, such as blockchain and AI to digitise Government. Also announced is the establishment of a new Future Sectors Team that will focus on supporting new and emerging sectors. Given the rapid innovation within tech, this team will play an important role in early identification within Government of technologies that need nurture in order to unlock their full potential.
However, while the Industrial Strategy is fairly comprehensive, there remain some gaps in the Government’s vision that still need to be addressed if outcomes are to truly match the scope of the Industrial Strategy’s ambition.
As alluded to previously, first among these is the need for rapid digitisation of the whole economy. While the White Paper talks in depth about the need to support a range of business sectors to adopt new technologies such as AI and machine learning, it does not recognise that the vast majority of smaller businesses have not yet implemented the basic digitisation to be able to use this next generation tools. These businesses won’t be able to take advantage of innovations in things like AI until they have built their digital foundations. So more demand side measures to accelerate digitisation would be really beneficial.
As techUK highlighted in our Budget Submission, as of 2015 only half of UK businesses were on the cloud, with take up rates for micro-firms being as low as 39%. In too many sectors the norm remains paper-driven systems. This makes it impossible to apply tools such as machine learning to map accounts to sales. For businesses to truly make use of new off the shelf tech, far more support is needed to lay these basic digital foundations, doing so could unlock an estimated £18.8 billion of value for SMEs.
The other key question for the strategy is just how Government will measure their success. For all the talk of developing and supporting new industries, there is little discussion of Key Performance Indicators (KPIs) against which sector deals or challenge funds will be judged. Further work in this area is likely needed, building on the good work in the Made Smarter review conducted by Juergen Maier which highlighted metrics such as Digital Readiness Levels as a way of determining whether programmes are having the intended effects. Such work will be valuable for Government and businesses alike, but needs to be set down clearly as part of each sector deal.
All in all the White Paper is the clearest sign yet that the Government is ready to fully embrace the importance of technology to the future of our economy. Of course, just like a marriage, the proposal is only the first step. What comes next, in terms of deliver, will determine whether this is truly a relationship for the long term.
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