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The UK government has declared its industrial strategy “critical” to its overall growth mission.
In the long-awaited, and delayed, plan, Sir Keir Starmer’s administration has thrown its weight behind eight sectors that it expects to deliver faster growth and higher pay for British workers.
The main focus of the strategy focuses on cutting Britain’s burdensome electricity prices for manufacturers. However, energy-intensive businesses must go through a two-year consultation period to determine whether they are eligible for new subsidies. Even then prices will still probably remain higher than in Europe.
What’s in the industrial strategy?
This 10-year plan attempts to tackle obstacles facing eight strategic sectors as companies try to scale up. The so-called “IS-8” are: advanced manufacturing; creative industries; clean energy; digital technologies; professional and business services; life sciences; financial services; and defence.
Alongside tackling high electricity prices there are plans to make it easier for companies to recruit, train and attract skilled workers through tweaks to the apprenticeship levy and visa schemes. It also ringfences £4bn of capital from the British Business Bank, a state-owned development bank, for industrial strategy sectors.
The bank will be able to make direct investments of up to a maximum of £60mn, up from £15mn currently, for the scale-up of businesses.
What does it leave out?
Aside from the promise of future savings for energy-intensive industries, there appears to be no new government money to match the ambition. There is also no support for companies outside of the chosen eight sectors.
Some critics have argued that the government should focus on the wider economy, particularly on retail and hospitality businesses that have been hit hard by tax reforms.
There is nothing in the way of support for energy costs or business rates reform, which had initially been promised in Labour’s manifesto, in the strategy. Some nationally important industries, such as the food sector, are questioning whether they are eligible to access the new funding and support mechanisms.
Does it tackle the skills shortage in critical industries?
Amid growing fears about a drop in workforce productivity, economic inactivity and a reliance on foreign workers, the government plans to spend £1.2bn a year on “skills” by 2028-29. The skills reform includes widening access to the apprenticeship levy and introducing more short courses within the eight sectors.
There is a recognition that the UK needs to attract talent from overseas and the strategy will widen access to skilled worker visas to include welders — who are critical in both clean energy and defence industries — laboratory staff, computer-aided designers, engineering technicians and data analysts.
To help industries navigate government processes, a concierge service will be set up, alongside a £54mn fund for attracting “the brightest minds” to the UK.
How much of it is new?
Some of the initiatives highlighted are not new. For example, the strategy rehashes an old pledge to spend “at least 10 per cent of the Ministry of Defence’s equipment procurement on novel technologies”.
The strategy instead shifts cash towards the eight strategic sectors while diverting it from other industries deemed to be insufficiently cutting edge.
Several existing government institutions will be given a mandate to deploy more money towards the IS-8, including the National Wealth Fund, UK Export Finance and UK Research and Innovation. The £4bn of BBB funding is carved out of a previously announced £25.6bn increase in financial capacity.
Among the other new elements is a review of Britain’s National Security and Investment Act to ensure that the legislation is “targeted and proportionate”. There will also be a rebranding of freeports and investment zones under the umbrella of “Industrial Strategy Zones”.
Which technologies will the UK be focusing on?
The strategy has bold ambitions for the UK to become a technology leader in electric cars, defence and artificial intelligence with a promise to “create the first European market for self-driving vehicles and services”.
The government will increase research and development funding to £22.6bn by the end of the decade from £20.4bn, with more than £2bn for AI and £2.8bn for advanced manufacturing over the next five years.
How has it been received?
The 160-page document includes several new initiatives but also repurposed many existing spending commitments.
Businesses, under fresh pressure from rising geopolitical risks and US tariff costs, welcomed the support but also expressed some disappointment that much of the funding had been announced earlier. Some groups expressed concern that many details appeared still to be missing.
Enthusiasm in Westminster for an “industrial strategy” has waxed and waned in recent decades, with some Conservative administrations considering the idea redolent of 1970s interventionism.
Greg Clark, business secretary under Theresa May, drew up a lengthy industrial strategy, but this was axed by Rishi Sunak when he was chancellor in 2021. Yet Labour fought the election promising to reinstate an industrial blueprint for the country.
