Skills, the Industrial Strategy and Spreading Prosperity throughout the UK

The UK economy has experienced a relatively poor productivity performance since the financial crisis, with this 'productivity puzzle' seeing real wages remain below their pre-crisis peak. The recent Industrial Strategy (2017) explains how an underinvestment in skills, in particular, has restricted growth. Brexit will also result in new challenges to the UK's skill base, where recent (large) flows of migration have contributed to overcoming skill shortages. A successful post-Brexit economy will require skills issues to be addressed if living standards are to improve skills and prosperity is to be spread across the whole country.
The objective of the Industrial Strategy "is to improve living standards and economic growth by increasing productivity and driving growth across the whole country". It notes that a challenge is for "every place to meet its potential". The Strategy is not about picking winners but about creating the right conditions and "creating an economy resilient to change and fit for the future". To achieve this, 10 pillars are set out to support the strategy. Developing skills is one of these pillars (and has been central to earlier strategies), but skills are also integral to other pillars, such as encouraging trade and inward investment, driving growth across the whole country, investing in the science base, and delivering affordable energy and clean growth. Inward investment, for example, boosts employment, enhances productivity and leads to positive spillovers and is attracted to areas with the appropriate skills base. Providing an attractive environment for inward investment is likely to be particularly important in the post-Brexit environment.
The Industrial Strategy notes that the regional productivity gap has been widening for decades in the UK and is wider than in other countries, and hence the stated objective "to improve living standards and economic growth by increasing productivity and driving growth across the whole country". Regional imbalances are seen to hold back growth and there is a need to support the retention and increase the attraction of graduates to the least prosperous regions, as regional imbalances restrict the national growth rate. The Strategy notes that not only are higher skills important, which has increased UK reliance on immigrants, but relatively poor economic performance is related to a workforce with a lack of technical and basic skills. Again, skill enhancement is going to be extremely important in avoiding damage to businesses if policies introduced after Brexit limit immigration. The Strategy notes a lack of STEM skills, but also highlights the inability to forecast skills demand accurately, partly as a result of the "lack of a single authoritative source". This ability to forecast is the demand for skills is important in informing student training choices.
Finally, the Industrial Strategy "recognises the importance of place at its heart". It is shown that London has pulled away from other areas in terms of GVA and whilst the importance of "unlocking agglomeration economies" is noted, avoiding the further widening of regional prosperity differentials and urban/rural differentials is highlighted.