7th Report - Industrial Strategy

Key findings

• The UK's history of industrial policy inconsistency has damaged economic performance; businesses investing over 15–20 year horizons require policy stability to justify long-term capital commitments.
• Eight growth-driving sectors identified (advanced manufacturing, clean energy, creative, defence, digital/tech, financial services, life sciences, professional services) but the industrial strategy lacks clear mechanisms to balance growth targets against net zero, regional development, and economic security objectives.
• Broken systems in public procurement, high energy prices, skills shortages, innovation diffusion problems, and finance access are holding back growth; these foundational barriers must be addressed alongside sector-specific support.
• The Government has not yet explained the precise contribution the industrial strategy will make to the Growth Mission target of fastest G7 growth by end of Parliament; IMF forecasts still show UK growth lagging US and Canada.
• Japan's mission-oriented approach (since 2021) offers lessons: linking grand challenges to sectors, using public-private partnerships, and providing multi-year financial commitments to attract private investment in batteries, semiconductors, and biopharmaceuticals.

Recommendations

• Set out a clear vision for the industrial strategy including ambition to decarbonise a fairer and faster-growing economy by transforming the '4i's': raising investment rates, accelerating innovation diffusion, creating inclusive growth, and immunising against geo-political shock.
• Establish clear metrics to judge progress in closing the growth gap and track not only headline growth but diffusion of innovation through supply chains, decarbonisation progress, and regional distribution of jobs.
• Define grand challenges or clear goals to galvanise whole-of-government effort and private-sector collaboration across sectors beyond the eight growth-driving priorities.
• Set clear targets for using trade deals and export teams to deliver growing market share in priority sectors.
• Transform public procurement organisation to drive UK growth, reduce non-tariff barriers, and create 'behind the border' opportunities for UK exporters in growth-driving sectors.
• Level the playing field on industrial energy prices with international competitors through policy changes.
• Devolve responsibility for post-16 technical education and training to local leaders (where adequate), transfer skills responsibility to Department for Business and Trade.
• Expand the Regulatory Innovation Office to act as clearing house for conflicting regulations and provide businesses a reporting mechanism.
• Introduce legislation to put the Industrial Strategy Council on a statutory footing.
• Through the Spending Review, appropriately fund the strategy and clarify the sum of public expenditure allocated to it and the Growth Mission for the remainder of Parliament.
• Clarify how the Government plans to balance tensions between maximising headline growth, supporting existing industrial jobs, and achieving net zero, economic security, and regional growth objectives.
• Continue scrutiny of forthcoming Defence Industrial Strategy, steel strategy delivery, and British Steel management through the Steel Industry (Special Measures) Act 2025.

Key actors

Liam Byrne, Department for Business and Trade, Industrial Strategy Advisory Council, Tata Steel, British Steel, Ministry of Economy, Trade and Industry (Japan), International Monetary Fund, Institute for Government