Demanding the Impossible: Public Procurement as Industrial Strategy

Governments have rediscovered industrial strategy as a central tool of economic policy in order to deal with a range of challenges, including ending the stagnation in productivity, transforming economies to meet net zero targets and coping with disruptive new technologies. An important emerging feature of this is a shift in emphasis from ‘supply-side’ policies, focussing on tackling market failures, to ‘demand-side’ policies, which aim to help entrepreneurs overcome uncertainty by providing a final market for their products. For UK policy makers, this shift represents opportunities to support nascent technology industries, but it also holds dangers of waste, overreach and political capture. The article assesses several possible approaches available to the UK and concludes that a viable strategy for the UK is not to try to compete with big spending schemes, like the USA's Inflation Reduction Act, but to work with entrepreneurs in de-risking new product development.