Chancellor Rishi Sunak and business secretary Kwasi Kwarteng have taken the unusual step of writing an open letter to companies defending their decision to drop the UK government’s industrial strategy.
In the joint letter published on the government website on Tuesday, the pair defended their move to replace the strategy in favour of a new “plan for growth” after widespread criticism from business groups.
The letter was issued just hours before a roundtable of business chiefs, where Boris Johnson, prime minister, had been braced for a grilling on why he had killed off the plans.
However, some of those present described the discussions as highly positive.
Sunak and Kwarteng wrote that they were “transitioning the industrial strategy” because the UK’s economic environment had changed significantly since the document was written, four years ago under former prime minister Theresa May.
Those changes included the new 2050 net-zero carbon emissions promise, Brexit and the Covid-19 pandemic.
“The plan for growth builds on the best of the industrial strategy from 2017 and makes the most of our strengths right across the economy,” it said.
“It refreshes and goes further than ever before on critical policies and guides the government’s longer-term growth strategy as we build back better, so we can unite and level up the country, support our transition to net zero by 2050, and seize the new opportunities of a Global Britain as an independent nation.”
The letter also emphasised the government’s plans to invest in skills and infrastructure while setting up Aria, an £800m scientific research agency modelled on a US government body. This summer ministers are publishing an “innovation strategy” as well as specific strategies for next zero, hydrogen and space, they said.
But the original plan to drop the industrial strategy has been castigated as a “short-sighted step that ministers will come to regret” by Adam Marshall, director-general of the British Chambers of Commerce.
Business leaders are also concerned that an industrial strategy council, made up of executives, was disbanded. At the same time the industrial strategy team within the business department was dismantled.
The new “plan for growth” received a lukewarm reaction with some critics saying it mainly listed existing policies and broad ambitions with few fixed measures or targets.
After the round table meeting Downing Street said the attendees had “discussed the importance of investing in new ideas, products and processes” to try to meet the government’s goals.
The meeting came as the first major plank in the government’s Covid-19 business support was due to be brought to an end on Wednesday with the closure of the state-backed loan scheme that has disbursed £75bn.
The government has created a new “recovery” loan scheme which offers banks guarantees of 80 per cent of loans, but these will come with less attractive terms, such as higher interest rates and the need for personal guarantees.
Struggling businesses will otherwise need to rely on commercial terms at their banks, while also facing the need to start paying interest on many more of the loans taken on during the pandemic.
The chancellor on Wednesday will formally launch a new £25bn ‘super-deduction’ tax break, which aims to boost business investment and productivity. Company investments in plant and machinery will qualify for a 130 per cent capital allowance deduction for the next two years. The Treasury wants to encourage companies to make additional investments, and bring planned investments forward.