The government has published its long-awaited Modern Industrial Strategy which aims to boost investment across key sectors in the UK including life sciences and advanced manufacturing.
What is the modern Industrial Strategy?
A long-term plan for the highest-growth sectors is needed because the UK’s levels of business investment have been among the lowest of advanced economies, the government said. While the country continues to attract businesses to start up, it has a poor track record of scaling and retaining them.
The 160-page Industrial Strategy builds on the Invest 2035 green paper published in October 2024 and focuses on supporting eight sectors (the so-called IS-8) and the clusters across the UK that support those industries.
This group of high-growth-potential industries includes advanced manufacturing, the creative industries, life sciences, clean energy, defence, digital and technology businesses, along with financial services and professional services.
The broad aim of the strategy is to increase productivity across these sectors which in turn will boost growth elsewhere, along with broader impacts on the UK’s resilience, and support the net zero transition.
The government said it will track the impact of the industrial strategy through metrics including business investment, Gross Value Added (GVA), productivity growth and the number of new large ‘homegrown’ businesses across the IS-8.
What targets does the Industrial Strategy set?
The strategy certainly sets ambitious targets. It wants the advanced manufacturing sector to achieve a near-doubling of business investment to £39 billion per year by 2035 and for the UK to become Europe’s leading defence exporter. It wants business investment in clean energy industries to double to over £30 billion in the next ten years. By 2030, it wants the UK to be the leading life sciences economy in Europe – and by 2035, it wants the UK to be the third most important life sciences economy globally, after the US and China.
The industrial strategy brings together a number of new and existing policies that are relevant across many industries and also some specific policies aimed at the IS-8. At the core of the strategy are the government’s plans to tackle high industrial electricity costs and help major investment projects receive timely grid connections, which it has identified as among the biggest blockers to industrial growth. It also plans to use the increase in defence spending to support these industries, to cut business regulation and to expand access to finance.
The British Business Bank will get increased capacity and £4 billion in additional capital for the IS-8. In the Spending Review the government also confirmed it will be spending £86 billion on UK R&D over the next five years, which will be more targeted towards the IS-8.
The strategy also outlines plans to capitalise on the value of UK data by treating it as an economic asset and setting up a framework to value and license public sector data assets. Meanwhile a new Global Talent Taskforce aims to attract researchers and entrepreneurs to the country and is backed with £54m.
The Modern Industrial Strategy and the chemicals industry
Beyond the core industries, the strategy also recognises the need to support the ‘foundational industries’ and their supply chains, which provide vital materials and parts - including chemicals.
The strategy points to the introduction of the UK Carbon Border Adjustment Mechanism (CBAM) due from January 2027, which aims to make sure carbon intensive products from overseas face a comparable carbon price to those produced here. This, the government said, is to ensure that decarbonisation of industry within the UK leads to a real reduction in global emissions, rather than simply displacing carbon emissions overseas. The UK CBAM will give industry the confidence to invest in decarbonisation in the UK knowing they won’t be undercut, it said.
The report points to the critical inputs key for supporting growth in the IS-8 that come from chemicals production in Cheshire, Grangemouth, the Humber, and Tees Valley as well as critical minerals clusters around the country. It said further work to be completed by the end of this year by a new Supply Chain Centre, which will review inputs, consider the impact of future trends on demand, and determine what action may be required, such as increasing domestic capability, diversification, or strategic international partnerships. This will sit alongside the upcoming 2025 Critical Minerals Strategy.
The government said it would also publish a technical consultation on a policy framework to grow the market for low-carbon industrial products, and said by incentivising investment into CCUS and hydrogen it is ensuring there are viable pathways for industries like steel, chemicals and materials to decarbonise. UK Research and Innovation will increase support for the IS-8 by pivoting its programmes and budgets towards research and innovation priorities set out in the Industrial Strategy and sector-specific plans.
Defence spending will aim at more investments that supports growth as well as security across areas like advanced materials, aerospace, AI, batteries and engineering biology. Here the aim is to pull cutting-edge technology over the ‘valley of death’ from prototype to production.
The Industrial Strategy and life sciences
Looking at life sciences, the industrial strategy noted that while the sector has made “an extraordinary contribution” to the UK’s international reputation in recent decades, UK life sciences companies have struggled to scale and capture economic benefits. Even in areas of traditional strength, such as regulation and clinical trials, the UK has underperformed in recent years, the document said.
The strategy said the government wants the UK to remain a “bastion of early-stage science” which will come through public investment at scale in discovery science, plus better access to data and better alignment between UK health and Life Sciences research funders. The government said the interventions of the Life Sciences Sector Plan – yet to be published in full - will be supported over the lifetime of the Spending Review by funding of over £2 billion.
This will include the creation of the Health Data Research Service up to £520 million through the Life Sciences Innovative Manufacturing Fund, which will bring globally mobile manufacturing investments to the UK.
“This will help build and maintain the UK’s critical sovereign capability across the sector, creating high-value jobs nationwide, and strengthening domestic health resilience and supply chain security,” it said. It said the Medicines and Healthcare products Regulatory Agency will become a faster, more agile regulator, and give industry a clearer route to market, while an NHS ‘Innovator Passport’, will enable innovative medtech products to reach patients more quickly. “A dedicated support service will also be established to help 10–20 high-potential UK companies scale, attract investment, and remain headquartered in the UK,” it said.
The Modern Industrial Strategy and Clean Energy Industries
On clean energy the strategy proposed double down on options with the greatest growth potential. Among these is wind, including onshore, offshore and floating offshore. Alongside this is nuclear fission – including the roll out of a fleet of Small Modular Reactors – and fusion. The strategy also said that with the UK’s significant CO2 storage potential, and transferable skills from the oil and gas industry, the country could become a “CO2 storage hub of Europe and support foundational industries” The UK also has an early-mover advantage in hydrogen technologies.
The Modern Industrial Strategy and Advanced Materials
“By 2035 the UK will be the best place in the world to start, grow, and invest in Advanced Manufacturing,” the strategy said. Here the plan is to prioritise manufacturing industries with the greatest growth potential which include automotive, batteries, aerospace, space, advanced materials and agri-tech. This will be backed up by £4.3 billion in funding for the advanced manufacturing sector, including up to 2.8 billion in R&D funding.
More on Industrial Strategy and innovation
- A manifesto for an industrial science and innovation strategy
- New Industrial Strategy will boost investment say business leaders
- UK chemicals industry jobs at risk without fossil fuel transition plan
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