Industrial Strategy 2025: Analysis

Today the Government published its long-awaited Industrial Strategy, as well as five of the eight promised sector plans, on Advanced Manufacturing, Creative Industries, Clean Energy Industries, Digital and Technologies, and Professional and Business Services, with plans for Defence, Life Sciences and Financial Services to follow next month. These chosen sectors, the “IS-8”, have been identified by the Government as areas where the UK can develop competitive advantage to improve productivity – a key structural issue for the UK economy – and drive growth.

The most trailed new announcements today were the interventions to reduce industrial energy bills for over 7,000 businesses, which are dominating the so far minimal media coverage. Comparatively high industrial energy bills are seen as a major threat to UK competitiveness, and industry had been calling on the Government to act. Make UK, the trade body representing the country’s manufacturers, has described today’s announcement as a “giant and much needed step forward”. The scheme will cut bills by up to 25% from 2027 – whether this is generous or quick enough to halt the trend of deindustrialisation remains to be seen.

This is the first industrial strategy since Theresa May’s in 2017. Industrial strategy has traditionally been viewed with scepticism by some free marketeers, with governments accused of “picking winners”. In this case, the winners are the IS-8, which currently account for only 32% of the UK economy. Writing in the Financial Times [paywall] this morning, the Prime Minister addresses this line of attack head on, arguing that it is government’s role to “invest in our comparative advantage and make bets in pursuit of growth”. Governments of all political stripes across the western world are increasingly embracing this approach as they compete for advantage in the sectors of the future and attempt to head off the threat of populist parties through economic growth.  

The PM is also keen to stress that this strategy is not being done to business but has been written in close consultation with it. Indeed, an Industrial Strategy Bill will put the Industrial Strategy Advisory Council on a statutory footing, giving it access to government data to monitor the delivery of the sector plans and hold it to account. The inclusion of specific metrics to measure success and the specificity of the sector plans appears to set this apart from previous UK industrial strategies.

There is a significant degree of natural repetition from the Spending Review and 10-year Infrastructure Strategy. Much of the Government’s investment, at least for the first part of this plan’s duration, had been announced at the Spending Review, including the £86bn in R&D funding. Where today’s documents differ is that they say more about the quantum of private investment that the Government hopes will be crowded in through a combination of public funding and enabling actions. The 400 pages across the various documents are unwieldy (and far longer than the last iteration of an Industrial Strategy, which was 250 pages), but only government can produce this kind of authoritative, holistic view of a country’s investment opportunities and where they perceive them to be. And this strategy is notable for its focus on connecting places with investment, including through the enhanced and increasingly assertive Office for Investment and a new Strategic Sites Accelerator.  

This is the last major strategy in what some have labelled “everything month”, and the Government is clearly determined to make more of it than they did the Infrastructure Strategy – which was met with a bit of a shrug, it largely being a reiteration of previously announced initiatives. The Prime Minister, Chancellor and Business Secretary are all doing media rounds today, despite the international backdrop – highlighting the significance of the Industrial Strategy for the Government’s growth agenda.