If the Prime Minister doesn’t know about industrial failure, he needs a new strategy

It is quite an unusual sight to see the Prime Minister getting agitated about deindustrialisation in Scotland. Indeed, on the whole it isn't desperately common to see anyone getting agitated about deindustrialisation in Scotland.

Today most newspapers are carrying the news that Prime Minister Keir Starmer is 'shocked' to discover that two steel-making plants in Scotland are mothballed. Parts of economic policy (mainly business support and some aspects of infrastructure) are devolved but much remains in UK control. It seems odd the UK Prime Minister wasn't aware who manufactures steel in the UK.

This seems even odder given that he has just negotiated terms of trade with the US which include tariff regulations on steel. He should have been briefed in relation to that if nothing else. But the fact that a UK Prime Minister can appear shocked to discover what is happening in major industries in his own nation perhaps isn't as surprising as it seems.

There are two things you'd expect a government which was interested in industrial development to do. First, it would gather granular information on the state of industrial manufacture in the UK. Second, it would pay attention to that information. But the reality is that almost every industrial site in the UK is seen as a 'local matter' until it embarrasses a national government.

It doesn't really matter whether it is Scunthorpe or Port Talbot, major industrial sites (particularly if they produce goods which don't have a brandname that will be familiar to consumers) are taken to be things which tick away in the background. When they get into any kind of trouble, at a national level this comes as something of a surprise.

And when it does happen, when a major industrial site that most of the country wasn't really aware of in the first place does come under financial pressure, it is then generally reported as a 'fears for jobs in the local economy' story.

Compare and contrast this to the narrative around any kind of financial pressure on big financial institutions. A steelmaker, oil refinery or car assembly plant that is at risk of going out of business is a local problem for blue collar workers; a bank or large financial institution in financial trouble is a national crisis which all of us must worry about all the time. It is never presented as a 'local jobs problem for the City of London'.

What this reveals is the UK's true economic priorities. Many of its industrial sites are owned overseas and their owners often aren't committed enough to the UK to invest time and money influencing national policy. Look at Grangemouth; its owners were not negotiating, not seeking subsidies or perks or dispensations. They just didn't want to run it any more and there was no other buyer interested.

So it is that public policy in the UK is probably unaware of just how uninterested it is in industrial development. We talk about it, but we aren't really committed. The UK Government doesn't appear to know that two steel plants in Scotland are mothballed, but you can scour the Scottish Government's website in search of a strategy for steel in Scotland and you'll struggle.

This is the simple reason; the ways in which you support the financial industries and service sector (particularly the services-to-business sector) conforms closely to UK economic orthodoxy while the ways you support the industrial sector are largely contrary to UK economic orthodoxy. This of course is in itself a result of the enormous lobbying power imbalance between finance and industry.

Financial markets want government to keep out of the way other than when it wants them to stimulate those markets in a particular kind of way (usually through deregulation or some form of currency manipulation like raising or lowering interest rates). Industrial developments are not well served by this kind of supply-side economics. Money doesn't need a buyer in the same way steel needs a buyer.

Thus say lowering interest rates may increase general consumption and so make financial assets more lucrative, but you cannot sell more steel quickly simply by adjusting prices in the economy. Someone needs to buy the steel to make something with the steel and then they need to be able to sell that to someone else. Financial assets are traded in the blink of an eye; real world assets need time and negotiation to sell effectively into markets.

The UK Government shouldn't be shocked that two industrial plants are in mothballs. That has been the semi-intentional result of UK policy since the 1980s, or at least a byproduct of policy politicians seem to have made peace with. But that does not mean things are better in Scotland; we are pursuing the same approach. That's at least part of why these two plants are mothballed in the first place and then we're talking about it so little the Prime Minister doesn't even know.

Only a new approach to economic development has any chance of turning this round. Only a shift from supply-side economics to an industrial policy will chance this situation. Find out more here.