Industrial Strategy
Delivering on a key manifesto promise and a Green Paper originally released in October 2024, the Government has today published its Industrial Strategy; a cornerstone 10-year plan to support the wider growth mission and seize high potential opportunities across the economy.
The Strategy has come at a pivotal time; just the week after the Infrastructure Strategy and two weeks after the Spending Review – two announcements which aimed to underline the significant boost Labour has given to the long-term capital budgets of key departments. The Government will be hoping that these, together with today’s Strategy, will help to boost business confidence and demonstrate a distinct Labour vision to voters.
In line with the Green Paper launched last year, the Strategy identifies eight key sectors (IS-8), each with high potential growth capacities and each being on average 27% more productive than the rest of the economy. These are: Advanced Manufacturing; Creative Industries; Clean Energy; Defence; Digital & Technologies; Financial; Life Sciences and Professional & Business. Each sector will receive their own formalised and individual sectoral plan and, at the time of writing 3 of sectoral plans have not be publicised.
On top of these, “Foundational Industries” have also been dropped into the Strategy as an unofficial additional sector, a move that has political, as well as economic and policy, significance. With Reform having also pushed for a more interventionist approach to championing UK industry, Labour is keen to highlight its work in industrial supply chains, such as steel, where the hoped for benefits will be felt in seats where the two parties are going head-to-head.
Not only are these sectors highly productive, innovative and leading UK exporters, they are also strategically important across the wider economy. To support this, today’s announcement also looks to tackle key cross-sectoral issues such as skills policy, which will be aligned with the IS-8 through £1.2bn’s worth of additional investment - £187m of which will go on AI upskilling in schools and £100m of which will go towards engineering.
While much of the Strategy is wholly in line with the Government’s previous policy statements in this area, there are also new inclusions, most notably around energy prices. In a tacit recognition of the growing pressures facing business – and in reaction to the heavy lobbying from multiple sectors on the issue – the “British Industrial Competitiveness Scheme” will reduce electricity costs for many “Foundational Industries” by making eligible businesses exempt from paying green levies including the Renewables Obligation, as well as Feed-in Tariffs and the Capacity Market. Additionally, a New Business Growth Service – designed to streamline access to government support – will be introduced.
Overall, the Strategy has been received with cautious optimism by business, especially in response to initiatives to boost upskilling and reduce energy costs. However, as will always be the case when government picks out certain areas of the economy for additional backing, some sectors outside of the IS-8 – most notably, hospitality and retail – have criticised the plan for the relative lack of support. Acting Shadow Energy Secretary Andrew Bowie MP has suggested the initiative to lower energy costs is too little and fails to “tackle the root cause of our high energy prices".
Much of the messaging in today’s plan is a continuation of what the Government has already pioneered in its other economic announcements – with an emphasis on capitalising on datacentre investments and AI growth zones, increased defence investments, and enhancing skills. Through this continuity, the Government hopes to show that – despite the global turmoil – its priorities remain the same: powering growth, widescale infrastructure renewal, and transforming the state to be “stronger, more capable and agile”. The Prime Minister Rt. Hon. Sir Keir Starmer MP will hope these can produce tangible results – both economic and at the ballot box – to deliver on his pledge to “create good jobs that put more money in people’s pockets”.
Key Reforms
Tackling high industrial energy costs
•British Industrial Competitiveness Scheme to reduce electricity costs.
•‘Connections Accelerator Service’ to provide support connecting to the grid for demand projects.
•UK Carbon Border Adjustment Mechanism (CBAM) from 2027 to ensure that highly traded, carbon intensive products from overseas face a comparable carbon price.
Promote fair trade through a series of trade deals
•Legislation to increase the maximum size of UK Export Finance’s financial portfolio.
•Trade Strategy to be released later this week.
Expand access to finance
•Build on the British Business Bank with £4bn additional capital for the IS-8.
•Expand the mandate of the National Wealth Fund to deploy £27.8bn capitalisation to support growth.
Innovation
• £86bn investment into UK R&D.
•UK Research and Innovation (UKRI) will shift its focus to increase support for the IS-8.
•Industrial Strategy AI Adoption Fund to facilitate the development of AI solutions in high-growth potential firms.
•Develop and implement a data evaluation framework by April 2026
•£12m invested in UK Data Sharing Infrastructure Initiatives from April 2026.
•£36m to support new Smart Data schemes and National Data Library.
Skills
•New Global Talent Taskforce and £54m Global Talent Fund to attract around 10 world-class researchers and their teams.
•£1.2bn of additional investment in skills per year by2028-29.
Streamlining and increasing accountability for the regulatory landscape
•Cut the administrative costs of regulation for business by 25%
Regions
•£600m Strategic Sites Accelerator to bring forward more investible sites across the UK.
•£500m Local Innovation Partnerships Fund.
•10-year Local Growth Plans and making a new £500m Mayoral Recyclable Growth Fund.
Industrial Strategy Sectors
Advanced Manufacturing
•£4.3bn in funding including up to £2.8bn in R&D.
•Enhancement of the Critical Minerals Intelligence Centre.
•Expansion of the Made Smarter Adoption programme for SMEs and initial funding of £40m for a new network for Robotics Adoption Hubs across the UK.
•Launching a new Upskilling and Reskilling Programme.
Clean Energy
•£1bn Clean Energy Supply Chain Fund under Great British Energy, including £300m to invest in offshore wind supply chains.
• £544m Clean Industry Bonus for offshore wind developers.
Creative Industries
•£150m Creative Places Growth Fund and new financial support for screen, music, and video games.
•Creative Content Exchange to be a trusted marketplace for selling, buying, licensing, and enabling permitted access to digitised cultural and creative assets.
•£9m Creative Careers Service.
•Targeted support for frontier industries with £75m for film and TV, £30m for video and £30m for music.
Defence
•Commitment to spend 10% of equipment budget on acquiring novel technologies.
•£400m to launch UK Defence Innovation to identify, develop and procure cutting-edge technologies.
•Increase MoD spending with SMEs by £2.5bn and a new SME Support Centre.
•Establish a new Office for Defence Exports.
Digital &Technologies
•£670m for the development and adoption of quantumcomputers.
•£500m delivered through the Sovereign AI Unit, and a new programme of AI Growth Zones.
•Expanding the Government’s AI Research Resource (AIRR) by at least 20x by 2030, accelerating AI innovation.
Financial Services
•Set up a bespoke Financial Services ‘concierge service’ to help international firms understand UK regulatory environment.
Life Sciences
•£600m for a Health Data Research Service to create a secure and AI-ready health data platform.
•Up to 520m for the Life Sciences Innovative Manufacturing Fund to bring globally mobile manufacturing investments to the UK.
•One major strategic partnership annually with leading Life Sciences companies.
Professional & Business Services (PBS)
•£150m to support the sector.
•Expand the Made Smarter programme to boost tech adoption and AI integration for SMEs.
•Expand the new AI Skills Hub, launching in summer
2025.