Prime Minister Theresa May has kick-started her bid to reshape the UK economy outside the European Union and chaired her first meeting of the Cabinet Committee on Economy and Industrial Strategy, aimed at drawing up an industrial policy to "deliver an economy" that works for all.

The newly-created committee will look at tackling long-term productivity growth, encourage innovation and focus on industries and technologies that could give the UK a competitive advantage in a post-Brexit world.

Before the meeting, May said: "We need a proper industrial strategy that focuses on improving productivity, rewarding hardworking people, with higher wages and creating more opportunities for young people so that, whatever their background, they go as far as their talents will take them. We also need a plan to drive growth up and down the country - from rural areas to our great cities."

The challenge for the new prime minister is to find a strategy that will stop the decades-long decline in the UK's manufacturing sector by helping companies face the challenges posed by globalisation but at the same time without affecting market forces that make them competitive.

A government spokesman said in a statement after the meeting, which was held on Tuesday (2 August): "The prime minister emphasised that the objective of the government's new industrial strategy should be to deliver an economy that works for all."

The spokesman added that the meeting focused on ways the government could support growth in different areas of the country.

The ministers who attended the meeting agreed that the strategy to be adopted should be focused on "playing to the country's strengths while also creating an economy that is open to new industries, particularly those that will shape our lives in the future," the spokesman said.

May possibly reluctant to endorse Northern Powerhouse plan

Northern Powerhouse blueprint
The government's blueprint for connecting the Northern Powerhouse Crown Copyright

The Financial Times noted that May's move to seek a national industrial strategy could be an indication that she is reluctant to endorse former chancellor George Osborne's Northern Powerhouse plan. She is believed to prefer turning the concept into a nationwide agenda to boost productivity outside of the south-east.

However, as a sign of continuity to Osborne's contributions, Neil O'Brien has been recruited to join the policy unit. O'Brien was a former special adviser on devolution to Osborne, the FT noted.

In a vote against Osborne's Northern Powerhouse that is centred around Manchester, the newspaper highlighted Business Secretary Greg Clark's comments that the government should "do more to support cities outside London."

Chancellor Philip Hammond told the meeting that by cutting the productivity gap between London and the southeast and the rest of the country, UK's economic output could rise by 9%, which would add over £150bn pounds to the economy.

May's strategy welcomed

Theresa May
Prime Minister Theresa May lis keen to draw up a national industrial strategy Paul Faith/ AFP

Terry Scuoler, the head of the EEF manufacturing trade body said: "The very fact that the new prime minister is chairing this committee, I hope, addresses one of the weaknesses of the last two administrations ... that is the relative lack of joined-up thinking, a cross-governmental approach."

He added: "If this committee chaired by the prime minister states something, it is going to be potent."

Reuters said that while police details are currently scarce, the strategy is likely to combine state-backed investment in traditional infrastructure such as roads and rail with funding for essentials such as broadband and lower energy costs, along with a push to train more highly skilled workers that the industry requires.

David Bailey, professor of industry at Aston Business School told Reuters: "The Brexit vote and euroscepticism was strongest in former manufacturing areas, where the industry has gone, the good jobs have gone and people feel disaffected. If May's going to do something about reconnecting, manufacturing has got to be part of the story."