UK Industrial Strategy: key components and high-growth industries
UK Industrial Strategy: key components and high-growth industries
In October, the government published its Green Paper: Invest 2035: the UK’s modern industrial strategy. The Industrial Strategy could be a key driver of the UK’s economic future, its productivity and competitive position. This comprehensive Green Paper addresses the biggest problems facing the UK economy and sets clear priorities for high growth sectors.
This article sets out the broad principles of the Industrial Strategy and the opportunities for businesses in the eight identified high-growth industries. You can also find out more about our position on the Industrial Strategy.
High growth sectors
The UK government has prioritised eight sectors which offer the highest growth opportunity for the economy:
- Advanced manufacturing
- Clean energy industries
- Creative industries
- Defence
- Digital and technology
- Financial services
- Professional and business services
- Life Sciences
Foundations of the UK Industrial Strategy
The UK Industrial Strategy stands on several policy areas that they believe will propel development and investment throughout Britain. These foundations are the building blocks that help tackle productivity issues and unlock barriers to growth.
Innovation: Boosting R&D and data insights
To boost productivity in key sectors, the UK must accelerate innovation and ensure data is managed safely and ethically. Successful initiatives like the Made Smarter programme and Innovate UK Catapult network support research, development and innovation.
The Chancellor announced several investments in the Autumn Budget including:
- £2bn investment for health R&D to drive innovation and support the UK life sciences sector
- £520m for the new Life Sciences Manufacturing Fund (£70m in 2025/26 initially)
People: Developing skills and education
The most significant barriers to investment in the UK from a people and HR perspective include skills shortages, talent retention issues, and insufficient personal development infrastructure. The CBI reports that 75% of businesses face skills shortages so it is an important policy area the government needs to address. New efforts, including the new Skills England brings together central and local government, businesses, training providers, and unions to tackle these challenges.
Infrastructure & Energy: Supporting clean energy initiatives and transport systems
Infrastructure is crucial for economic growth, connecting people, goods, services, energy, and ideas. The UK government aims to improve planning, transport, and digital connectivity to support growth-driving sectors and address regional constraints. Key initiatives include updating National Policy Statements, introducing the Planning and Infrastructure Bill, and developing a 10-year infrastructure strategy. Energy reforms focus on reducing high electricity costs and accelerating grid connections to support clean energy goals. Great British Energy will invest in clean power generation, providing demand certainty and enabling supply chains to invest. These efforts aim to create a pro-business environment and unlock regional growth potential.
Regulation
Regulation plays a crucial role in addressing market failures, creating economic certainty, and driving innovation. The government is reviewing current regulations to ensure they support growth-driving sectors and will reform those that are not fit for purpose. For instance, changes to non-financial reporting regulations are underway. New regulatory frameworks will support emerging technologies, with the Regulatory Innovation Office speeding up decisions for innovations like engineering biology and drones.
Mobilising capital – Access to finance and creating a stable tax environment
Businesses still face challenges in accessing growth capital due to risk aversion and regional disparities. Government schemes like VCT and EIS offer tax incentives but come with complex criteria and high competition. Industry-specific barriers also exist, with high-tech and life sciences facing longer development cycles and greater uncertainty. Investors, on the other hand, struggle with assessing risk versus return and securing follow-on funding. Addressing these barriers by expanding the investor pool, facilitating flexible investment models, providing regional support, and improving investor confidence could enable more UK companies to scale up and become global players. This would create a more vibrant and competitive environment, contributing to both the national economy and international markets.
Place: Unlocking regional growth
The industrial strategy aims to unlock the potential of UK cities and regions by attracting investment and creating a thriving business environment. Currently, economic performance is skewed towards London and the South East, while other city regions underperform. For example, Greater Manchester, the West Midlands, and Glasgow have significant untapped potential, with a combined productivity gap of £47 billion per year for the eight largest cities outside London. The strategy will focus on high-potential clusters in sectors like life sciences, financial services, advanced manufacturing, digital industries, and clean energy. Local growth plans, supported by devolved powers and funding, will drive regional growth.
Our position on the Industrial strategy
We believe that the UK’s mid-market, those entrepreneurial and ambitious businesses with revenue’s of £10m - £300m, has the potential to make a huge contribution to achieving the objectives of the Industrial strategy. Despite making up less than 1% of UK businesses by number, mid-market companies account for one in three private sector jobs and have revenues equivalent to more than half of the value of UK GDP.
The UK’s mid-market businesses have the capacity, appetite and know-how to successfully invest in innovation and growth. Mid-market companies will also be key to creating new skilled jobs. Our bimonthly mid-market survey has found these companies plan to allocate multi-million-pound investments in the UK over the next five years.
Sadly, governments and policymakers have historically failed to harness the wealth and job creating opportunities of the mid-market, focusing instead on high-profile enterprises or fast-moving start-ups. We aim to change that and are responding to the Industrial strategy consultation to make the case for the policies and support that will boost the mid-market’s economic contribution even further. We will also continue to champion the cause of our clients and their individual industries.
The strategy aims to create a resilient framework for economic growth through research and development, skill improvement, modern infrastructure, business support, and regional development. The question will be whether the strategy offers businesses the right incentives and support to deliver sustainable growth?
How we can help your business
The Industrial Strategy addresses a number of policy areas that can drive growth. We have the expertise and knowledge to help your business make the most of the proposed policy measured in each of these policy areas. Find out more about the expert teams that can support your business.
People
Our People Advisory Services team help clients understand how to create the right workforce and workforce policies to support your business strategy. They can guide you in how and where to upskill and develop your workforce.
Our employment tax specialists can then help you manage the development and incentivisation of your workforce as tax efficiently as possible both in the UK and internationally.
Mobilising Capital
Our corporate finance teams have extensive experience in guiding and advising businesses through the funding process regardless of the lifecycle stage your business is at or the type of capital, debt or equity you are looking for.
Innovation
The government encourages and incentivises innovation and R&D through a number of channels. The incentives take the form of Research and Development tax credits and allowances such as patent box and other sector specific tax reliefs. You may also be able access a range of grants for innovation and growth projects. Talk to our Innovation and R&D tax team today to see if your business qualifies.