The UK will take a “more muscular approach to government” under Labour, according to a new industrial strategy that portrays the world as more volatile but also full of opportunity for British business.
The strategy, published on Monday, contains a range of policy measures ranging from lowering energy prices to speeding up drug approvals. One of the most important messages in the strategy is that the government will focus on accelerating growth for the fastest-growing third of the economy.
The government has identified eight sectors – the IS-8 – that it judges have the highest potential for economic growth. They are: advanced manufacturing, the creative industries, life sciences, clean energy, defence, digital and technology businesses (including artificial intelligence and quantum computing), financial services such as banking and insurance, and professional services such as accounting and the legal profession.
Those sectors will receive the bulk of government industrial support, whether that be through cheaper energy prices, trade support or skills training.
Here are some of the most important policies in the strategy.
Cutting energy costs for big users
The centrepiece of the industrial strategy is reducing energy costs for big electricity users – although not immediately. Action to cut energy costs has been a key request from industry for years.
The government said that it would introduce a “British industrial competitiveness scheme” from 2027, to reduce electricity costs for 7,000 businesses that use electricity intensively. Companies in manufacturing sectors such as automotive, aerospace and chemicals will be exempted from paying for the renewables obligation, feed-in tariffs and the capacity market. Those “policy costs” were imposed to pay for green energy programmes but industry has long argued that they put British businesses at a disadvantage to competitors.
Energy-intensive industries – including makers of steel, chemicals and fertilisers – will also receive a 90% discount, up from 60%, for other policy costs that help to fund the electricity network. The government said the network charging compensation scheme will cut costs for about 500 businesses from 2026.
Speeding up grid connections
Energy costs are not an issue for companies that cannot even connect to the grid in the first place for factories, energy generation or housing. To reduce the queueing times, a new “connections accelerator service” – launched by the end of this year – will act as a concierge for projects that could create jobs or speed economic growth.
The government will add new powers to change regulatory processes to make it easier for strategically important projects to get connected, and will look at ways of pressuring network companies to speed up.
Increase exports
The government wants to be seen as a free trade champion, even as the US turns to protectionism. It highlighted talks on trade agreements with the Arab states of the Persian Gulf, South Korea, Switzerland and Turkey, aligning industrial strategy with Japan, and looking at ways to deepen cooperation with France and Germany.
Overseas investment support will be focused on the IS-8 companies, and ambassadors in key markets will be tasked with drawing up plans to help those sectors. UK Export Finance, a government department that guarantees loans for exports, will be allowed to grow further.
Defence technology
The government has already committed to increased defence spending, making it an attractive source of funding for British industry in straitened times. At least 10% of the Ministry of Defence’s equipment budget will go on “novel technologies” such as drones and artificial intelligence. To that end, UK Defence Innovation, a body announced in March, will get a budget of £400m.
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The government will also provide the National Security Strategic Investment Fund up to £330m by 2030 to invest in companies that can help UK national security, while the existing National Wealth Fund will be directed to consider military investments.
Equity stakes in promising startups
At this month’s spending review the government committed another £4bn to the British Business Bank, which supports small and mid-sized UK companies. That took its total capacity to £25.6bn.
The BBB will be allowed to take equity stakes for the first time of up to £60m, which could give the government big, direct economic returns if startups become highly valued, billion-dollar “unicorns”.
Quicker medicines and opening health data
The government will aim to cut delays to medical trials and “streamline” drug approval processes at the Medicines and Healthcare products Regulatory Agency to try to accelerate development of new treatments and make it more attractive for companies to invest in the UK. NHS procurement of medical technology will also be accelerated.
What was missing?
There is still more detail to come on various important sectors. Notably, “sector plans” for the life sciences and financial services, plus a whole separate “defence industrial strategy” have not yet been published.
Ministers have also promised a trade strategy, a “resilience strategy”, a clean energy workforce strategy, a circular economy strategy to look at the reuse, repair and recycling of materials and products, and a critical minerals strategy, to add to the huge pile.
The government is also relying on other policies to provide benefits for British businesses – eventually. Monday’s industrial strategy did not offer any new policies to reduce wholesale energy bills, by far the most important determinant of overall costs. In the longer term, the government hopes that increased renewable electricity supplies will lead to much lower prices.