National Securonomics
National Security and Industrial Strategy
Over the next decade, Britain’s resilience will be determined by its industrial strength in a range of sectors formerly far removed from the national security domain. In 2021, Britain’s government belatedly introduced a legislative framework (the National Security and Investment Act) to prevent hostile foreign investment in 17 key sectors of the economy. However, this has provided only half an answer to a historic British problem. It is highly likely that any future UK government will seek to defend those sensitive sectors. But the question of how to drive greater domestic ownership and growth of the industries within them remains unanswered.
This work must begin by recognising that Britain’s industrial security strategy choices are harder than those of the US, EU or China for the simple reason that our internal market is far smaller. A successful UK industrial strategy for the relevant sectors must therefore ground itself in a comparative international analysis of where Britain can plausibly compete and where we cannot. In the latter areas, Britain will need to redouble its search for international alliances which can provide the security we need.
In May 2023, Labour’s Shadow Chancellor, Rachel Reeves, set out the party’s approach to economic policymaking in a speech in Washington. Her vision, ‘Securonomics’, placed security at the heart of Labour’s economic mission. Labour’s Shadow Secretary for Business, Energy and Industrial Strategy, Jonathan Reynolds, has also committed Labour to an industrial strategy where security is central, with a focus on building Britain’s economic resilience.
This paper argues that:
Incorporating national security into Securonomics will require an active industrial strategy, not just a defensive investment screening policy. This active strategy should be applied to the 17 areas identified by the National Security and Investment Act (NSIA). The paper suggests that those 17 areas should be handled through three clusters: clean energy, digital and advanced manufacturing.
Securonomics for national security will require more expert structures in government, capable of making tough and technical decisions on which sectors should be prioritised domestically, and which should be pursued through international agreements. These structures or bodies could fast-track planning decisions and coordinate action across departments. GB Energy, Labour’s proposed publicly-owned clean energy company, could perform this role in relation to clean energy. This paper proposes that two further equivalent bodies should perform the same function for digital and advanced manufacturing clusters.
In each of the three clusters, the government could adopt a three-pronged approach, consisting of defending UK ownership, building domestic expertise and growing the underlying sectors. Across this work, the next government will need to strike a balance between state support and economic openness, while drawing on the unique value of our global partnerships.
A strategy worth its name should be framed over at least a decade, rather than a single parliamentary term. It will also need to be rooted in local plans and supported across multiple departments.
