The industrial strategy must focus on the adoption of technology

by: Juergen Maier | on: 06.12.17 | in: Industrial strategy

On Tuesday November 28th the APPG on Inclusive Growth held an event in Parliament to explore the relationship between inclusive growth and industrial strategy. Four leading participants in the current debate on industrial strategy joined us to share their views, including Juergen Maier, Chief Executive of Siemens UK. A summary of Juergen’s contribution at the event is set out below.

Author: Juergen Maier Published: 06.12.17 Categories: Industrial strategy

The industrial strategy must focus on the adoption of technology

by: Juergen Maier | on: 06.12.17 | in: Industrial strategy
On Tuesday November 28th the APPG on Inclusive Growth held an event in Parliament to explore the relationship between inclusive growth and industrial strategy. Four leading participants in the current debate on industrial strategy joined us to share their views, including Juergen Maier, Chief Executive of Siemens UK. A summary of Juergen’s contribution at the event is set out below.

“What do we need to do to create more inclusive growth? Fundamentally we need to raise wages. Then through the application of new technology – you can call it the 4th Industrial Revolution or apply other labels – can we raise productivity to support rising wages, and can we create more jobs than that new technology displaces? These are the key questions that the industrial strategy needs to answer. Obviously we also need to output more, so GDP needs to grow, and ultimately we need to export more because we have a significant trade imbalance that needs to be resolved. Does this new industrial strategy help to do that, and will it allow the business community to drive those outcomes?”

Increasing R&D and innovation spending

“Where the Government’s White Paper is very strong –and should be celebrated and applauded  – is in the area of R&D and innovation. Ever since I’ve worked in industry in the UK, which is for 30 years, we have argued that we need to get our level of R&D spend, both government and private sector, at least up to the average of OECD states. To finally see that ambition in print is brilliant and in support of that the focus on using the Industrial Strategy Challenge Fund to drive innovation in certain areas is very strong. We have moved a long way from ‘we don’t pick winners’ to realising that we do have a finite resource and that it must be focused at some priority areas. This doesn’t mean focusing on particular companies, but on certain themes and the Grand Challenges identified in the White Paper are excellent.”

Adopting new technologies

“Where the White Paper is quite weak – and this doesn’t mean I’m criticising this work, but it is where we need to do more work –  is on adopting technologies. There is a lot of focus on creating technology – artificial intelligence, autonomous vehicles etc – but there is very little that supports small and medium-sized businesses to adopt new technology at a faster pace. The Made Smarter Review that I have been chairing looked at this issue very closely. To give you an idea of how bad the UK is on this, if you take Industry 4.0 technologies such as robotics and additive manufacturing, about 50% of German SMEs are on the journey of beginning to adopt those technologies. In the UK only about 10% of our SMEs are on that journey. In many cases a lot of UK SMEs haven’t even begun to use e-commerce technology and some don’t have a website.

“To improve this situation we need better funded, and better organised, business support mechanisms. For example, in Cheshire, and the picture is similar elsewhere, there are 133 business support mechanisms. Multiply this across the country and there are thousands and pretty much all of them are not scaled and are ineffective. What we need is a more scaled-up system that really supports small business, especially with adopting technology. The White Paper falls short on this issue because the government is much more used to funding research and innovation and it is more reticent on the adoption angle of what needs to be done. We are in a competitive world and if you look at all of the countries where Industry 4.0 is being adopted faster than in the UK – which is pretty much every country with an ambition to take a slice of this digital revolution, not just the advanced economies – there are better, more focused support mechanisms for small companies.”

Focus on the creators and makers

“The industrial strategy should concentrate on, and help to drive, the creating and making industries. This means manufacturers, but also the people that create software and create AI. I believe these industries should make up about 20% of the economy. In the UK they currently make up about 10%, in Germany it is about 23%. This is the part of the economy which is the productivity driver, your export driver, it creates the high wages and it puts a huge amount of money back into the economy which supports retail and other services. Go to cities like Stuttgart and look at what is driving their economy, it is very successful exporters and SME companies which are adopting and driving innovation. This is what we need more of in the UK.”

 

Juergen Maier is the Chief Executive of Siemens UK. He can be followed on Twitter @Juergen_Maier.

 

Before the event Liam Byrne MP, co-chair of the APPG, sat down with Juergen Maier to discuss his recent review for the government on digital industrialisation:

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