UK should not prop up failing industries, say business groups

Businesses have urged the government to resist propping up failing firms or blocking foreign takeovers, in a raft of submissions on the UK’s industrial strategy.

The business, enterprise and industrial strategy committee called for comments from dozens of businesses and trade bodies on how to come up with a coherent blueprint for British industry.

Those who submitted evidence raised a wide range of concerns including a skills shortage, uncertainty about the impact of Brexit and the need to promote growth outside London and south-east England.

But among the most common concerns was that a government-led industrial strategy should see the state meddling where it is not wanted or lacks competence.

Submissions from business lobby groups the Institute of Directors and the Royal Academy of Engineering cautioned against the government expanding its powers to block foreign takeovers.

Engineer Rolls-Royce agreed, saying: “A closed approach to foreign takeovers will generally deter investment unless the criteria that would trigger intervention are clear and consistent.”

The RAE said the government should focus instead on making sure that British ideas and innovation are commercialised in the UK, rather than being developed abroad.

Tata Steel UK, which has become the poster child for the steel industry’s woes, said the government should provide support to see it through until conditions improve.

It cited state help to deal with the British Steel pension scheme, which has become a sticking point in efforts to put together a rescue deal for the Port Talbot steelworks in South Wales.

But the IoD said a strategy that “props up uncompetitive industries in the long-term is unsustainable, bad for the economy, and doomed to failure”.

The IoD and firms including Heathrow and technology conglomerate Samsung also told the government it should not back certain firms or industries at the expense of others.

“There is a danger that an industrial strategy which intervenes to pick ‘winners’ that are not the market’s choice could be damaging for the UK and lead to a number of unintended consequences,” said Heathrow.

Several submissions highlighted a skills shortage in the UK, with too few graduates coming through the education system with qualifications in science, technology and engineering.

Many urged swift action to clear up uncertainty about the terms of Brexit to prevent investment by companies being postponed or cancelled.

The Trades Union Congress called tariff-free access to the single market the “single most important step” that could be taken to support British business.

The Food and Drink Federation said 29% of 400,000 staff in the industry were non-UK EU nationals and said the £22bn industry needed continued access to those workers.

It also stressed the importance of being part of the single market, saying the addition of import tariffs would pose a “grave threat” to the industry.