Author: William Milne
On Monday, the government released plans for the long-awaited 10-year Industrial Strategy, which marks a “turning point for Britain’s economy” and seeks to increase investment in eight priority sectors, create 1.1 million jobs, and ensure long-term economic growth.
Notable aspects of the new Industrial Strategy include a £275 million investment to train British workers, exemptions for thousands of businesses from green levies, spending an extra £1.2 billion on skills by 2028/29, increasing research and development spending to £22.6 billion annually by 2029/30, and a £380 million investment in the creative industries, among a range of other new policies to support economic growth.
The eight sectors prioritised by the government, referred to as the IS-8, are advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services.
On Sunday, business secretary Jonathan Reynolds told PoliticsUK that the Industrial Strategy is about “a stronger economy, better jobs […] more economic activity, more businesses succeeding.”
Sir Keir Starmer said: “This Industrial Strategy marks a turning point for Britain’s economy and a clear break from the short-termism and sticking plasters of the past.”
The government is focusing on the IS-8 since they are already the UK’s most “productive, innovative, exporting sectors”, according to the government. The government explained that the IS-8 are, on average, 27.1 per cent more productive than the national average.
Investment in UK workers
A key aspect of the new Industrial Strategy is a £275 million investment from the government in technical training and apprenticeships.
The package includes funding worth £200 billion for new technical excellence colleges and other facilities, which will train individuals in local industries. Funding will also cover short courses in artificial intelligence and digital manufacturing and major capital upgrades to training providers across England.
The Industrial Strategy seeks to provide a solution to the fact that 1 in 7 young people in the UK are neither in education nor employment, being categorised as NEETs. The number of people on an apprenticeships has also dropped by nearly a fifth between 2016/17 and 2023/24.
Reynolds said these plans aimed to “end the over-reliance on foreign labour and ensure British workers can secure good, well-paid jobs in the industries of tomorrow and drive growth and investment right across the country.”
He vowed that the Industrial Strategy “will be powered by investing in British people”. This could be seen as a response to Reform UK’s efforts to target voters in post-industrial seats who feel at risk from immigration reducing the number of jobs available.
Shadow business secretary Andrew Griffith showed his support for the government’s prioritisation of skills but also claimed that “the Government are stepping on the accelerator and the brake at the same time.”
Reduction in energy costs
Another important part of the Industrial Strategy is the government’s plans to reduce energy costs for over 7,000 businesses by exempting them from various levies, including the Renewable Obligation which mandates that a certain percentage of energy purchased comes from renewable sources.
From 2027, the government will introduce a new British Industrial Competitiveness Scheme. This will reduce costs by up to £40 per megawatt-hour for thousands of manufacturing businesses, ultimately equating to a reduction of 15 per cent in energy bill costs, which will be worth an estimated £500 million per year.
This will be done through exempting eligible businesses “from paying the costs of the Renewable Obligation, Feed-in Tariffs, and the Capacity Market”, according to the government. British businesses pay some of the highest electricity costs in Europe, and so the aim is to bring UK businesses more in line with other European businesses. This policy will be reviewed in 2030.
The specific businesses that will benefit from the plan will be decided after a consultation ending in 2027.
500 of the UK’s most energy-intensive companies will also have network charges cut. They currently have a 60 per cent discount through the British Industry Supercharger scheme, but this will be raised to 90 per cent from 2026.
This policy could be seen as the government acknowledging that taxes which seek to promote the UK’s vision of moving towards renewable energy conflict with ensuring British businesses remain competitive, potentially signalling a move away from Labour’s net-zero pledges.
The Conservatives highlighted this claim, with acting shadow energy secretary Andrew Bowie suggesting that Labour was “finally admitting that the costs of net zero are so high that they’re having to spend billions of pounds of taxpayers’ money subsidising businesses’ energy bills to stop them going bust.” He argued that the government’s plans did not seek to tackle the core reasons behind high energy prices.
However, the government has pledged to ensure that these discounts will not mean higher costs will be passed on to other businesses or customers.
Reynolds told Sky News that “You can do both things together; you can have ambition on climate and be competitive. These changes mean no one is going to have a higher bill to pay for this; no one will have to pay higher taxes to pay for this, but how those costs are represented in the system will change over time to make sure we have competitive industries.”
How has this been received?
Reception to the Industrial Strategy has been mixed, largely relating to the industries that are either included or neglected by the plans.
Representatives of the manufacturing industries have reported their satisfaction with the Industrial Strategy. A joint statement released on the UK government’s website and on behalf of various business groups, including the bosses of the British Chambers of Commerce, Confederation of British Industry, Enterprise Nation, Federation of Small Businesses, Make UK, Small Business Britain, and Startup Coalition, welcomed the strategy.
They said, “The Industrial Strategy launched today marks a significant step forward and a valuable opportunity for the business community to rally behind a new vision for the UK – boosting confidence, sentiment, and enthusiasm for investment.
“From start-ups and small businesses to large corporates, businesses need a more attractive, stable environment that enables faster, easier, and more certain investment decisions.”
A number of people involved in industries which are not represented within the IS-8, particularly those working in hospitality, have reported disappointment as a result of the plans.
Kate Nicholls, chief executive of UKHospitality, said: “This is not an Industrial Strategy that will deliver growth equally across the UK. In fact, by ignoring 70 per cent of the economy, it is at odds with the government’s ambition to create jobs and help people into work.
Shadow business secretary Andrew Griffith also echoed these concerns, writing on X that “all business sectors – such as retail and hospitality – also need lower energy costs – not just some.”
Harry Quilter-Pinner, executive director of the Institute for Public Policy Research, commented that “the UK has had 11 economic strategies in 13 years.
“That chop-and-change approach wasn’t fit for purpose. Today’s Industrial Strategy finally turns a page, offering much-needed consistency, clarity, and certainty for business
“The test now is whether this 10-year strategy moves from PDF to process.”
The UK’s last Industrial Strategy was in 2017, when the Conservative government published a four-year plan ending in 2021.
Today’s Industrial Strategy announcement will be followed later this week by a new Trade Strategy, which seeks to help the UK become one of the most well-connected countries to do business with.
