Industrial strategy must have focus on environmental sector

The government's new industrial strategy announced today could be strengthened by a more sustained focus on environmental industries, says Matthew Farrow.

Industrial strategy is back in vogue but I’m old enough to remember several of the previous iterations - such as the muscular attempts to build around sector strengths by Michael Heseltine in his mid-1990s pomp (when his baroque job title - Deputy Prime Minister and President of the Board of Trade - was more eye-catching than any policy success) and Lord Mandelson’s attempt over a decade later at the DTI to boost manufacturing through a series of industrial strategies as a way out of the recession.

It would be hard to discern much lasting impact on the shape, structure or success of the British economy from these efforts, but I don’t think we should dismiss the latest revival of the industrial strategy approach out of hand. For one thing, both Heseltine and Mandelson were uneasy allies of weak prime ministers, Major and Brown, neither of whom seemed much interested in the topic, whereas Theresa May as a new and unchallenged PM is at the peak of her power and has made a new industrial strategy a priority. At the same time, the shock of Brexit to the political system has made politicians and policy makers more willing to look at radical ideas. 

As someone who represents a wide range of environmental businesses, I feel that the traditional environmental protection sector could benefit from being part of an industrial strategy but is at risk of missing out. This is partly due to definitions - the ‘low carbon sector’ has become the preferred green ingredient of contemporary industrial strategies, in part because it emphasises readily identifiable flagship technologies such as electric vehicles and renewables. It also feels more ‘future-orientated’ than a traditional environmental activity such as contaminated land clean-up. But there are several reasons why the broader environmental sector (encompassing sub sectors such as waste management, land remediation, environmental laboratories, flood defence and so on) has real industrial strategy potential.

First, the broader sector is particularly effective at generating jobs across the UK. Most of my member companies at EIC are based outside London and the south east - many firms involved in tackling industrial pollution are inevitably based in the old industrial heartlands, while for facilities such as waste management and recycling plants are inevitably spread across the country. The skill levels of those jobs are also varied, with a good mix of technical apprenticeship type roles to graduate and post graduate scientific and consultancy roles.  

Second, we have ready-made export markets. When I travel abroad I find that the UK has a good reputation for environmental technology and services. There is a recognition that our early industrial development and the fact that as a small crowded island we have always had industrial activity in close proximity to people means that we are world leaders in many aspects of pollution control.  

Many developing countries around the world have rising middle classes who are no longer prepared to put up with dirty air and water, which has created an urgent need for skills and technology which we have. It’s always worth pointing out that the demand for such local environmental services is less vulnerable to damage President Trump may do to global climate action plans - the need to clean up local environments is unrelated to what the international community does.

Third, building a strong home market for the environmental sector needs policy tweaks more than subsidy - something which makes it attractive to a government without much spare cash.

And lastly, the green sector has public support. Research for the Greener UK coalition run by Green Alliance shows that 80% of people want environmental standards to be as strong as or stronger than currently after we leave the EU.

So what would be the core elements of an industrial strategy for the environmental sector? We would need to start off by being clear about where we enjoyed a clear competitive advantage. Land remediation, air pollution control, flood risk management, offshore decommissioning and combining expertise and analysis to solve complex environmental urban problems would be just some examples.

We also need to ensure that post-Brexit there is a clear direction of travel for environmental policy which continues to see environmental standards steadily increasing and proper enforcement. And then we need a much better approach to environmental exports by the new Department of International Trade, which needs to work with bodies like my own to map the markets which offer most potential in the next five years. Other issues to be looked at include public procurement and how we make best use of our world class universities and financial sector.

The UK environmental sector is well-placed to make a real contribution to the industrial strategy.  Across areas such as air quality, land remediation, laboratory analysis and flood defence, we have innovative world class companies and a global reputation.  The aims of the strategy - to create jobs across the UK, to reach new export markets and to innovate - are all things the environmental sector already does and could do more of with smart policy making in areas such as public procurement and regulation.  We will be responding in detail and exploring the possibility of a sector deal as suggested in the government's green paper. 

While Brexit has put the environmental business sector on the back foot, the industrial strategy agenda is a chance to get on the front foot. In the coming months we at the Environmental Industries Commission will be setting out a blueprint for such an industrial strategy. The opportunity is there, so let’s grasp it.

Matthew Farrow is the executive director of the Environmental Industries Commission (EIC), which represents the businesses which provide the technology and services that deliver environmental performance across the economy.

This article was first published on the Business Green website.