If we have learnt anything from the last government it is that, as Obama’s chief of staff famously once put it, “plan beats no plan”. That is, having a theory of change is not some sort of intellectual indulgence reserved for Substackers. It is essential for a leader to be able to prioritise where they will spend their political and fiscal capital. And, in some ways, having a plan is more important than what the ideological or policy content of that plan is.
Lucky for us, Mr. Burnham does have a plan – or seems to. It dances around a few buzz words including devolution, reindustrialisation, regional growth, and ‘Manchesterism’. The focus on devolution and industrialisation, in particular, are well-founded on a few accounts. The first and most important is economic: a large part of the Britain’s productivity plateau since the mid-2000s (yes, it began before 2008) was the result of our ever-shrinking share of manufacturing and “hard technologies” as a proportion of GDP. This is because hard technologies tend to have higher R&D spillovers, and higher productivity per worker than services sectors. The UK’s advanced manufacturing sector, for example, accounts for just 2% of jobs but 6% of GVA (Gross Value Added) – or £80 billion. Meanwhile its creative sector, with 10,000 more workers, generates just £64 of GVA. So, while this Burnham government tends to talk about reindustrialisation in rather vague terms that connotate “place-based” policy and regional growth, the central argument for industrialisation is productivity: one cannot be a rich nation relying solely on strong services and financial sectors.
The second reason why the devolution-industrialisation focus is sensible is social: the UK’s regional inequality is among the worst in the developed world. It is therefore a valiant area for any government to prioritise. And finally, there is an institutional case: Britain is unusually centralised. Central government has to deal with far too many mundane day-to-day issues – from signing off on local planning applications to fixing potholes. Devolution is therefore a plausible mechanism for better government, and outsourcing some of the smaller issues so that central government can focus on the more strategic ones.
The problem is not, then, that Burnham is barking up the wrong tree. These are the right themes. The question, instead, is whether he is serious about the content of these issues – or whether he simply sees these as policy areas that fit his particular political tone: a crowd-pleasing King of the North who wants to drain the Bollinger-stained Westminster swamp with his Manchester charm.
The core tension that Burnham faces is his regional priorities running up against the immediate economic and geopolitical pressure the UK now faces to be globally technologically competitive. The next three years will be critical in determining whether the UK can carve out a few defensible stakes a number of key technologies: including AI hardware, advanced manufacturing quantum, biotech, photonics, and AI for science to name a few. Given the speed that the technological frontier is evolving – and how easy it is for countries like the United States to do things like block access to leading artificial intelligence models -- the UK’s ability to compete in this ruthless global race is not so much an economic question as it is a national security imperative. The window is narrowing and countries that miss might not get a second chance.
This means that, in an odd twist of fate, the UK has inherited a Prime Minister (rightly) focused on devolution, but just at the point in time where we cannot afford to forfeit global competitiveness. If we fail to get on top of technological change, the UK will be poor and irrelevant for the rest of the 21st century. The challenge for Burnham, then, is whether he can square his programme and brand of politics with the responsibility he has to keep the UK in the technology race.
There are, I argue, four things Burnham will need to face up to if he is to rise to the challenge. First, he will have to accept that for the UK to compete in the global tech stack there will inevitably be some concentration of capital into a handful of “champion” companies. This is because the economics of scaling globally-competitive tech companies runs in political tension against some of Burnham’s equal growth emphasis: it relies on outliers rather than the average, and concentration rather than spreading capital thinly. Put simply, Burnham’s type of economics grates against the venture capitalist’s “power law” view of the world.
Burnham must not only recognise this fact but actively lean into the idea of building UK national winners, even if it occasionally goes against his simultaneous-growth-everywhere instincts. This is for a few reasons. One, just because a company is born in a particular part of the country does not mean – if it effectively scales and stays in the UK – that all its value accrues in that one place. Three in four employees at Silicon Valley’s largest firms now work outside California, and those firms have grown their national workforce at more than double their local rate. In fact, the “national winner” approach to economics directly challenges Burnham’s place-based agenda: the problem is not just that the UK over-concentrates wealth in the south-east, it is that the UK has not scaled enough truly competitive companies sufficiently for its wealth-creating effects – jobs across the country, pulling demand from domestic supply chains (and therefore inadvertently helping scale companies elsewhere) – to be felt.
Two, if Burnham really wants regional growth he should be looking to building the UK winners that will provide the tax base that will enable him to pursue that agenda – regardless of where those companies arise from. Three, Burnham should build out a political narrative around sovereignty – and, in particular, technological sovereignty. Many of his voters won’t like the idea that the UK has become inextricably dependent on foreign (U.S.) technology, and the best way to begin changing that is to build behemoths of our own. And four, if we get industrial policy right, there should indeed be UK national winners born in non-south east areas – from robotics strengths in Liverpool to semiconductors in Wales and Bristol, the UK does have genuine regional specialisms to be bullish about.
Thus Burnham must accept and lean into the “national winners” approach. But Burnham’s third challenge is that he must be rigorous and specific about what he means by “reindustrialisation”. This is certainly something the UK needs – both to increase productivity and to rebuild our defence industrial base. However, if thrown around loosely and glibly, “reindustrialisation” could end up being a political vessel that connotes ideas of place-based politics, without any real economic substance. Indeed the UK’s industrial strategy is already at risk of lacking definition. The Invest 2035 strategy already spans eight sectors covering roughly 35% of total UK employment; far from prioritisation, this clearly reflects a failure to make choices about where industrial policy is really needed. If Burnham is to make industrial policy serious rather than merely crowd-pleasing, he should spell out his thesis for why it is important for the economy and security. And he should even consider setting a headline target – such as aiming for manufacturing to be 10% of UK GVA (it is currently 8%) – to keep the goal of reindustrialisation grounded in something measurable.
The fourth, final, and perhaps greatest challenge for Burnham will be fleshing out an actual theory of devolution – rather than simply saying the words and hoping something happens. Crucially: devolution is a mechanism, not itself a theory of growth. It does not, by itself, change what is decided or deal with any of the fundamental constraints holding back UK growth. These constraints are now well known: planning, energy costs, infrastructure, technology adoption, our inability to mobilise institutional capital into UK private markets etc. None of these are devolution questions in the first instance.
So the test of Burnham’s devolution agenda is this: does devolving this particular power improve our chances of fixing some of these problems better and faster? In some cases, the answer might be a clear yes: local grid and energy connections, incentivising regional powers to accelerate planning (by, for example, devolving tax collection powers which increases the incentive for local mayors to build stuff), or devolving foreign direct investment (FDI) to regions with their own economic specialisms. But, and this is Burnham’s test, sometimes the answer will be no: some industrial policy levers – like procurement and advanced market commitments (AMCs) – need to be centralised. And, sometimes, central government will be inherently better at being honest about where different regional strengths lie, rather than leaving it to people who have an incentive to say they are “world class” at anything and everything in order to receive subsidies.
All this is to say that there are plenty of reasons why Burnham’s government is actually banging the right drum. The question is does he have the policy substance – the economic theory of change – to go along with his political style? And, as a corollary, is he mature enough to square his regional priorities with the UK’s absolute necessity to compete globally in the technological revolution? And occasionally prioritise the latter?