Robust industrial strategy a £230 billion opportunity for economy

The UK faces missing out on a £230 billion opportunity, if it cannot provide a more robust industrial strategy to funnel STEM graduates into work relevant to their expertise. Competition from more lucrative employment in the finance and business sectors, as well as a hostile environment to immigrants in the UK driving international students away, is creating a talent shortage in the scientific fields the country was hoping to drive the economy after Brexit.

A new study produced by the Society of Chemical Industry (SCI) and L.E.K. Consulting has assessed the socio-economic benefits of the UK government developing and delivering a new, modern industrial strategy. The strategy would focus on industries identified by Chancellor Jeremy Hunt as being a priority for future growth. These include heavy industry, cleantech, life sciences and emerging digital technologies.

Part of this plan would see incentives and tax breaks deployed to aid spending in the STEM sector. With a major economic slowdown and heightened inflation continuing to bite, many firms are scaling back on research and development (R&D) investments in the hope of weathering the storm. But this threatens the UK falling behind similar economies in terms of scientific development – at precisely the time when it had suggested becoming a leading technology hub would make up for revenues lost to the Brexit process.

According to the researchers, markets such as the US and EU are already increasing STEM spending, under the Inflation Reduction Act and Green Deal Industrial Plan respectively. The UK needs to keep pace with this, while also looking to include simplified tax relief systems, which encourage investment in next-gen technologies and discourage investment in old, high-carbon models.

To do so could help propel the UK economy to £230 billion in gross value added by 2030. Those gains can only be realised from the cumulative impact from a 2024 policy introduction, though – meaning action needs to be taken sooner, rather than later.

SCI CEO Sharon Todd explained, “For too long, “industrial strategy” has been used as a catchphrase rather than a tangible and actionable plan to drive economic growth. The UK has a world-leading science base, and we need to maximise this commercial potential. An ambitious and practical industrial strategy focused on our science base would mean the UK would attract investment from global scientific companies, rather than lose out to other countries. More focus needs to be given to creating value from science, supporting start-ups to scale, and creating an environment that attracts valuable scale-up capital.”

But the UK needs to do more than simply attract capital if it is to make the most of its STEM potential. It also needs to ensure that the sector is able to attract the best and brightest – who at present are feeling their skills are better appreciated elsewhere; be that other industries, or other countries. While 2.5 of every 1,000 graduates is in the stem sector – in line with Germany, and proportionally ahead of the US, many are going elsewhere when it comes to entering employment.

The researchers found that better-paid work was often drawing STEM graduates away from the sector, with 15% of chemistry and physics students ending up in business, HR and finance work. Meanwhile, just 8% of physics students worked as science professionals 15 months after qualifying. This is contributing to a skills shortage – exacerbated by international students increasingly feeling unwelcome in the UK, where the government has been vocal in its desire to cut down immigration. Making this worse, the revised graduate route visa introduced to help non-EU citizens work in the UK STEM sector has too limited timescale, and many employers are unaware of it anyway.

To help overcome these hurdles, the SCI and L.E.K.’s report urges the government to provide a comprehensive plan for educating young people in preparation for cleantech or life sciences career and for upskilling and reskilling those already in the workforce. It is also recommending that immigration policies are flexed to help attract international talent.

L.E.K. Consulting Vice-Chair for Sustainability John Goddard added, “The UK has an enviable reputation in science and technology development, yet successful scale up and commercialisation is far more elusive. Globally, there is increasing focus on national industrial strategies with significant progress being made. Now is the time for the UK to grasp this opportunity to accelerate our GDP growth.”