Shoosmiths' legal experts comment on government's Industrial Strategy

Following today's announcement on the government's plans to boost waning productivity through a series of steps outlined in the UK's Industrial Strategy, our lawyers offer up their thoughts on its main points:

On clean growth and energy

Angus Evers, real estate partner and head of environment:

"The Industrial Strategy sends mixed messages about delivering clean, green growth. It is encouraging to see Clean Growth as one of the four Grand Challenges, building on the ambitions set out in the recently published Clean Growth Strategy, but we are still yet to see the government's 25-year Environment Plan for England. There is a recognition that the traditional linear 'take, make, dispose' economy is no longer sustainable and that a transition to a more circular economy is needed, but the government will need to step back into policy making on waste and resources if that transition is to happen.

"Reducing business energy costs is a key part of the Industrial Strategy and it is pleasing to see energy efficiency put forward as one of the main mechanisms for achieving that goal, rather than further measures to remove support for renewable energy. The government has also recently consulted on proposals for streamlined energy and carbon reporting, which are intended to make it easier for companies and their shareholders to see the potential benefits of energy efficiency.

"Alongside its commitments to clean growth in the Industrial Strategy, the government is also committed to maximising the UK's oil and gas assets, particularly by developing the emerging shale gas industry. It is considering how to implement its proposals for a Shale Environmental Regulator, which would give to a single regulator all the powers currently held by local planning authorities, the Environment Agency and the Health and Safety Executive in relation to shale gas exploration and production. That would be an unprecedented move and it is surprising to see a single industry afforded such preferential treatment. Not even the nuclear industry has its own single regulator covering planning, environmental, and health and safety matters. Such a move would be likely to anger opponents of the shale gas industry and decisions of such a regulator would be likely targets for legal challenges."

James Wood-Robertson, commercial partner, Infrastructure:

"Today's Industrial Strategy announcement seems to have been positively received although, predictably and understandably, much of the political talk is about its delivery in a post-Brexit world.

"With the legislative process having slowed significantly due Brexit and a small majority in Parliament, there are question marks over the government's ability to push through the legislation necessary to deliver this effectively.

"From an energy perspective, "Clean Growth" was recognised as one of the four "grand challenges" - global trends that successful economies and societies need to embrace and overcome. Essentially, this means the reduction in carbon without having a detrimental effect on the economy and the Clean Growth Plan is generally a positive indication of the government's commitment to Carbon reduction.

"Furthermore, the focus on offshore wind and electric vehicles (EV) demonstrates the government's desire to prioritise investment in technologies and sectors from which a manufacturing industry may develop in the UK.

"The strategy talks about local industrial strategies to be developed based on local strengths, seeking to deliver growth across all areas of the UK to counter long-standing criticism that the South East receives the lion's share of UK investment. This is potentially great news for the Yorkshire region.

"Emphasizing the importance of innovation, the Department for Business, Energy & Industrial Strategy has used an innovative approach to identify industrial clusters. This data can be used to help the City Regions (including Leeds) to identify areas on which to focus investment."

On artificial intelligence

Alastair Peet, corporate partner and head of the venture capital practice, said:

"It's extremely positive to see the government recognise the potential that artificial intelligence could bring to the UK and global economic systems with significant investment.
"The UK is a world leader in AI and with a well-established digital economy it is anticipated that by developing these 'general purpose technologies' new products will come to the fore across many industries and will create more, much needed jobs. However, we shouldn't rest on our laurels - there is significant global competition, particularly in China and the USA, countries that have more to invest and arguably a greater volume of and more wide ranging data.

"We see first-hand the appetite for investment in AI in the UK, having advised upon deals such as the sale of Touchtype (who developed AI predictive text tool, Swiftkey) to Microsoft, and advising Cambridge-based speech recognition company, Speechmatics on investment.

"The government hopes that investment in AI will ultimately lead to the UK's GDP increasing by 10% by 2030. However this depends upon the success of the new agency, ensuring our industrial strategy is kept on track and productivity is closely monitored. It also relies upon continued VC and corporate investment in AI, and upon the UK nurturing, retaining and attracting the talent for those companies to develop new innovations."

On innovation, research & development

Andy Brennan, commercial IP partner:

"The government has suggested practical and realistic methods to boost much needed investment in the UK research and development arena. These include creating a new Industrial Strategy Challenge Fund to support the development of transformative technologies, such as robotics and biotechnology, and creating tax incentives to encourage more business investment in R&D projects.
"These additional monetary streams should improve both national and international collaboration between universities, businesses and government and increase the number of innovative, business focussed projects producing market-ready goods, services and processes. This is important in an international research and development community that is fast-growing, ever-changing and competitive.

"There is also the promise of spreading best practice to Universities relating to IP commercialisation so they can create more successful spin-outs with sustainable licensing regimes and more balanced equity sharing splits. This will help to translate more world-class research into commercial outcomes for the public benefit and allow Universities to re-invest revenues into other research areas.

"Starting at this level is crucial, as better developed and commercialised University technology will improve UK business technologies and innovations, which in turn will attract global collaborations and world class investment and people. Two major pharmaceutical companies have recently announced they will be relocating their R&D facilities to the UK, and we can expect more of this movement if these Government initiatives are successful.

"Let's hope this increased support comes to fruition as this will be particularly important pre and post Brexit to ensure the UK is a competitive, attractive and global player in the science and technology market."

Alison Gilson, corporate partner, Edinburgh, gives a Scottish perspective:

"Scottish university spin-out companies are collectively a significant contributor to the Scottish economy. The country is renowned for its technological and scientific research and it is encouraging to hear that the government intends to support this area.

"There is a desire to ensure that we stay ahead of the curve and investing in the development of our technologies and innovations is key to that. However, there is also a need to assist businesses in other sectors to ensure that they are able to utilise those technologies and innovations to ensure that they continue to thrive.

"With Brexit looming, it is important to support our Scottish and UK businesses across all sectors to ensure that they remain competitive and drive future economic growth. As the Government's Industrial Strategy gains momentum, it will be important for us, as professional advisers who often fulfil a "trusted adviser" role for clients, to follow it closely to ensure that we are best placed to advise our clients going forward."

On talent, skills and apprenticeships

Antonia Blackwell, senior associate, employment:

"As part of the government's drive for higher productivity, it recognises in the White Paper the need to develop skills, particularly in technical areas. As a result, the government has announced that it will establish a technical educational system to improve skills in this area which it claims will rival the best in the world, to stand alongside our world-class higher education system. Included within this is the creation of 15 new technical education routes, T-levels, as well as repeating the commitment to increase the number of apprenticeships. It will also look to enhance the current apprenticeship levy, for example allowing levy-paying employers in England to transfer up to 10% of their fund to another employer, including within their own supply chain, from April 2018.

"In addition, the government will introduce a new entitlement for adults who lack digital skills to enable them to access specified basic digital skills training free of charge. Alongside this, it will seek to establish a new National Retaining Scheme to help people to re-skill and up-skill, beginning with a £64m investment for digital and construction training.

"Much of the White Paper focuses on meeting the challenge of an aging population and the need for businesses to redesign jobs and workplaces to better use older worker's experience, enabling individuals to keep active and to stay in work. It also recognises the need for workers to have more flexibility in order to help balance work and caring responsibilities, and to support people returning to work after taking time out for caring duties. The government states that it will work with business to develop an action plan to make flexible working a reality for all employees across Britain and to inform the evaluation of the Right to Request Flexible Working Regulations. Building on the work of the Taylor Review, the government also states its intention to develop a common set of principles and measures to help assess job quality and success in the modern world of work.

On closing the productivity gap

Janette Speed, partner and head of Shoosmiths office in Edinburgh, commented:

"People are at the very heart of HM Government's proposed bold Industrial Strategy. For its vision to be realised, key skills must be nurtured, talent inspired and our future business leaders encouraged to be receptive to the power of a team ethos, real collaboration and entrepreneurial thinking.

"As an integral part of the UK's professional services sector, legal firms must be attuned to the fact that the younger (and future workforce) are highly receptive to agile and innovative working practices. As 'digital natives', they expect to be able to readily utilise cutting edge IT and technology to support their own workflow and that of colleagues and clients.

"As a leading UK-wide law firm operating in an increasingly complex and fast-paced business environment, Shoosmiths already embraces agile and innovative practices. This includes ensuring individuals enjoy the freedom of flexible working, mentoring to instill greater knowledge and encouraging collaboration between teams. We are also developing products such as our 'Resource Solutions' package for in-house lawyers, which allows them to work smarter, saving precious time, money and resource.

"Though the report cites Germany and the USA as currently offering their respective nations greater levels of productivity, by adopting tools and working practices that allow the modern lawyer and indeed all sectors to work 'smarter, not harder,' there's every opportunity to close the gap.

On infrastructure

Martin Fleetwood, corporate partner, transport and infrastructure:

"The increase in the National Productivity Investment Fund is most welcome. No doubt there will be various calls for the rebalancing of expenditure on infrastructure projects between the north and south of the country, particularly with the Government's ongoing support of HS2. However, each proposed project needs to be considered on its merits and any decision should be made in the light of all 5 of the foundations of productivity. Whether these will always have a similar weighting in any evaluation may become a case for debate in the future.

"The White Paper refers to the use of a Rebalancing Toolkit to support high value transport investments. Within this tooklit should be the ability to move away from "classic" transport evaluation techniques to fully take account of the environmental and regeneration benefits that a city region can obtain from a light rapid transit system. Obtaining better connectivity between different modes is key, particularly through the development of transport hubs allowing easy interchange between different modes to provide efficient connections between homes, jobs and services."

On places

Martin Fleetwood also comments on places:

"The £1.7bn Transforming Cities fund, which was announced in last week's Budget is certainly welcome, however, once this is divided between the various city regions and other cities which are able to bid for the funding, the actual funding available for any one region for improving connections will be limited. While it would be sufficient to support road or cycle schemes, it falls short of the funding required for a transformational scheme such as a new light rail system in Leeds or Cambridge. With an additional 300,000 homes a year now due to be built during the remainder of this Parliament, getting the right transport connections in order to help shape travel patterns, particularly those which most benefit the local environment, is extremely important."

Janette Speed, real estate partner and head of Shoosmiths office in Edinburgh, gives a Scottish perspective:

"The Scottish Government's focus on a root and branch review of the planning system and the proposed new planning bill (to be introduced by the end of the year) is timely as we now learn of policies within HM Government's Industrial Strategy white paper to increase investment in transport, housing and digital infrastructure. It is to be welcomed that the white paper states that the vision is to ensure investment decisions are 'more geographically balanced and include more local voices.'

"Investment aside, the white paper makes clear that partnership working, including with devolved administrations', is at the heart of its approach.
"The Scottish Government's key objectives also include an emphasis on stronger partnership working. It also seeks to achieve enhanced status of both the national planning framework and the Scottish planning policy and crucially early resolution of planning issues.

"The emphasis on joined up thinking in relation to building more homes and delivering infrastructure with a view to giving greater certainty on housing statistics is welcome, as is shutting down the delay between permissions and delivery. The "infrastructure first" approach will be interesting to watch and whilst it will be some time before the Act is in play, the priority across all industry sectors should be the need to identify all possible means for addressing the current housing crisis.

"In my book, significant investment in infrastructure, supported by partnership working and coherent planning is a positive step towards helping to power the future economy. There are some grounds for optimism!"

On public sector procurement

Jennifer Clarke, senior associate, commercial:

"The White Paper is the latest indication from the UK government that the public sector finds elements of the current UK procurement regime overly restrictive. The message is that it wishes to help UK-based suppliers to compete effectively for government contracts throughout the supply chain.

"The main points of focus are (1) a desire to make public sector contracts more accessible to SMEs and (2) a further roll out of the "balanced scorecard" approach.

"In the context of transport, around 60 per cent of contracts within the HS2 supply chain are expected to be awarded to SMEs, and suppliers will be required to advertise subcontract opportunities to further boost SME accessibility. Away from transport, it is interesting to note that the United States is singled out as being particularly effective at using public procurement as an important source of finance for innovative businesses and promoting innovation through its Small Business Innovation Research programme. That programme is used as a model to increase the impact of the existing Small Business Research Initiative for innovative businesses. Together with the focus on R&D in the White Paper, this should result in welcome increased opportunities for our clients with innovative products to gain funding for research and development.

"The balanced scorecard approach referred to in the white paper is not new, having been introduced in October 2016, but this approach will be embedded in all major construction and capital investment projects going forwards. It contains a requirement for "procurers to consider relevant social and economic objectives, such as skills development, diverse supply chains and sustainability, alongside cost-effectiveness", points which have traditionally proved challenging to incorporate in procurements without risking breach of the EU procurement principle of non-discrimination on grounds of nationality. Whilst this approach is consistent with the government's previously stated aim of using strategic government procurement to drive innovation and enable the development of UK supply chains, the government will need to tread carefully so as not to put off overseas investment and procuring entities will need to continue to work within the constraints of the current UK procurement regime. Longer-term, such an approach is likely to be good news for both public sector procuring customers who want more flexibility and local/UK bidders looking for greater opportunities in the procurement supply chain."

On creative industries

Laura Harper, commercial IP partner:

"The UK's Creative Industries are acknowledged as world class in the strategy document and are soon to receive their own Sector Deal. They are identified as benefitting from the Government's £33m investment for the Industrial Strategy Challenge Fund which will support immersive technologies such as AR and VR. Support has also been promised to maximise the innovative strengths of the sector by building creative clusters across the UK.

"Given the North West's strong Creative Industries and Digital sector and the existence of effective clusters this could be beneficial to the region, particularly for the interactive entertainment & gaming businesses and TV and film industries."

"Under the shadow and uncertainty of Brexit, this news is to be welcomed but more clarity is needed on precisely how the investment will take shape in Manchester and its success will ultimately depend on the ability of all stakeholders involved to work together effectively.

"Collaboration is something which Manchester's public and private sectors have consistently proved themselves to be very skilled at so it would follow that investment here would have the best chance of achieving the goals outlined in the Government's strategy.

"We await with interest further information on the life sciences deal and the announcement of the Creative Industries deal and have no doubt that both will be present some great opportunities for the city and the region."