Maximising the UK Industrial Strategy: A Guide for Business Leaders, Investors, and Policymakers
Today, the UK government published its Industrial Strategy Green Paper, a public consultation that asks businesses to' help shape the industrial strategy.’
Timed to coincide with the International Investment Summit, the Green Paper presents the government’s vision for driving long-term economic growth through targeted investments in eight key sectors:
Advanced manufacturing,
Clean energy industries,
Creative industries,
Defence,
Digital and technologies,
Financial services,
Life sciences, and
Professional and business services.
For businesses and international investors, the UK Government’s vision presents both significant opportunities and critical responsibilities.
In this article and post, I share an overview of how business leaders and investors can engage with the Green Paper, leverage growth sectors, address workforce development challenges, and navigate the risks that come with policy shifts.
By contributing to the consultation, businesses and investors can help craft a strategy that delivers sustainable growth and secures the UK’s competitive edge globally.
The Green Paper Process: Strategic Engagement Is Key
This stage is essential because it lays the groundwork for a future White Paper, a more detailed policy framework before the final Industrial Strategy, which should be expected in Spring 2025. The White Paper, in turn, will form the basis for formal legislation and policy implementation.
Steps in the Process:
Green Paper Consultation (October 2024 - November 2025): A 1-month window (3 months were given for the 2017 Industrial Strategy), where stakeholders, including businesses, unions, and investors, are invited to respond to the Green Paper. This feedback will shape the final strategy. For businesses, especially those in the 8 sectors identified for growth, early engagement in this consultation is critical.
White Paper Development (Early 2025): Once the consultation concludes, the government will refine its proposals into a White Paper. This document will outline the specific steps and policies the government will take to drive the industrial strategy forward.
Legislation and Implementation (Mid to Late 2025): After the White Paper and the expected unveiling of the Industrial Strategy, the government ‘may’ introduce legislative changes or regulatory reforms to implement the strategy. During this stage, businesses must prepare to adapt to new regulatory environments and seize the emerging opportunities.
Ongoing Review and Adaptation: Post-implementation, the strategy will likely be reviewed regularly to ensure it is delivering on its goals. Businesses should remain engaged to influence any adaptations based on market conditions or technological advances.
Recommendation: Businesses should not only participate in the consultation process but also collaborate with trade bodies like Make UK, CBI to amplify their voices. Larger groups tend to have more influence, and joining forces with peers will increase the impact of your feedback.
Small and medium sized businesses (SMEs / SMBs) account for over 99% of the UK’s private sector businesses, accounting for 61% of employment and £2,355bn (53%). Large enterprise businesses in the UK account for 39% of employment and 47% of turnover generated in the UK. This is a community that needs to engage, especially from the outlined priority sectors.
Sector-Specific Opportunities
The Green Paper targets eight high-growth sectors that are vital to the UK’s future competitiveness. Each sector offers significant financial opportunities, particularly for those who align their business strategies with government priorities. The strategy aims to unlock billions in investment, drive productivity, and deliver regional and national growth.
Advanced Manufacturing: Technological advancements and automation could boost the sector by £20 billion by 2030. Businesses in this field should focus on innovations like AI-driven production and robotics.
Clean Energy Industries: With over £100 billion expected in private investment, particularly in offshore wind and hydrogen, this sector is critical to the UK’s net-zero ambitions. Businesses should explore partnerships in the development of renewable energy technologies.
Creative Industries: Already contributing £115 billion to the economy annually, the creative sector has the potential to grow by 25% with the continued development of digital content, gaming, and AI-powered tools. Additionally, the UK’s creative industries are a critical soft-power sector for which the UK is recognised, namely in film, TV, music and production, marketing and communications.
Defence and Security: The strategy’s focus on advanced defence technologies offers opportunities for partnerships in innovation and exports, especially in sectors like cybersecurity and autonomous systems.
Digital and Technologies: This sector represents one of the largest growth areas, generating over £400 billion annually. Continued advancements in AI, quantum computing, and fintech are expected to drive significant growth. The UK’s further education institutions, many of whom have spin-out teams that build businesses, need support to scale these in the UK with not just international investment but also capital and knowledge transfer from UK businesses through corporate venture capital.
Financial Services: As one of the UK’s traditional strengths, financial services will play a pivotal role in facilitating investments and innovations across other sectors. Businesses should prepare for new regulatory frameworks that enable fintech and digital assets.
Life Sciences: Further investment in biotech and pharmaceuticals could generate an additional £50 billion for the UK economy, particularly through innovations in genomic research and personalised medicine, which our leading universities are already developing through their tech transfer teams.
Professional and Business Services: This sector will benefit from enhanced digital tools and AI-driven business solutions, creating opportunities for firms to optimise their operations and expand service offerings.
The Critical Role of Education and Skills Development
One of the most significant challenges the UK faces in delivering the full value of its Industrial Strategy is the potential skills gap that might exist if our educational policy is not aligned so that it can be ready for the UK’s economy in five to ten years.
As new technologies emerge, the demand for highly skilled workers in sectors like clean energy, life sciences, and digital technologies will only increase. Without a clear strategy for UK workforce and skills development, the UK risks falling behind in the global race for talent.
Recommendations for Education and Skills Integration:
Strategic Workforce Planning: The Industrial Strategy must include a clear plan for skills development across all sectors. The government should work closely with stakeholders in government (Department for Education for example), academic organsiations and businesses to create vocational training programs and university partnerships that focus on high-demand areas like AI, cybersecurity, and biotechnology.
Lifelong Learning: Given the rapid pace of technological change, the strategy should promote lifelong learning initiatives, ensuring that workers can continuously update their skills. Businesses can partner with educational institutions to offer retraining programs.
Apprenticeships and Technical Training: Expanding apprenticeships in sectors like advanced manufacturing and defence will help create a pipeline of talent. This will ensure that businesses have access to the skills needed to meet future demand.
Risk of Overlooking Education and Skills:
Skills Shortages: Failing to address future skills shortages could hinder the growth of key sectors, especially in the creative industries, clean energy and digital technologies. Without the right workforce, businesses may struggle to not just scale up and innovate but attract investment into the UK and for the creative industries, production of TV and films into the UK.
Missed Investment: International investors may view the UK as a riskier market if it cannot guarantee a well-trained workforce capable of delivering long-term projects. A shortage of skilled labour would undermine the very purpose of the Industrial Strategy.
Stakeholder Engagement: Essential for Success
Effective stakeholder engagement will be critical for the success of the Industrial Strategy. The government’s efforts to create an Industrial Strategy Advisory Council, chaired by Microsoft UK CEO Clare Barclay, does signal a commitment to maintaining a continuous dialogue with businesses, unions, and educational institutions. However, more needs to be done to ensure collaboration across departments and sectors.
Key Actions for Businesses and Investors:
Participate in Sectoral Councils: Join advisory councils and engage with trade bodies to influence policy decisions.
Cross-Sector Collaboration: Many growth sectors, such as clean energy and digital technologies, are highly interconnected. Businesses should collaborate across industries to tackle shared challenges, such as supply chain vulnerabilities and skills shortages.
Educational Partnerships: Forge partnerships with universities and technical colleges to ensure that curricula are aligned with industry needs. This is particularly relevant for sectors like life sciences and advanced manufacturing, where specialised skills are critical.
Investors: Opportunities and Considerations
Currently, the UK does not invest nearly enough in itself as international investors do in the UK.
According to the Office of National Statistics, as of 2023, Gross Fixed Capital Formation (GFCF), a key measure of investment, which includes both public and private investment in infrastructure, machinery, and buildings, was around £390 billion in 2023. Meanwhile, the inflow of FDI into the UK in 2023 was estimated at £64 billion. This includes investments across sectors such as technology, manufacturing, and financial services, which were key drivers of this growth.
The difference between the level of UK investment and the inflow of FDI highlights the over-dependency the UK has on in international investment, a risk area that it needs to be addressed.
One solution to this risk is growing the UK’s corporate venture capital (CVC) ecosystem.
Compared to the USA, Japan, South Korea or China, the UK’s CVC ecosystem is modest. In terms of ‘participation of foreign and domestic corporate investors in CVC-backed rounds in 2023’, according to Global Corporate Venturing in 2023, the UK is over-dependent on foreign investment, with only 14% of all rounds being domestic. This compares with 42% in the USA and 67% in Japan.
This level of overdependence on international investment creates a level of risk for the UK, where third countries' economic cycles affect the level of investment they can make into the UK and IP ownership and retention.
As the Green Paper states, the UK ranked fifth out of 133 countries in the WIPO 2024 global innovation index but only 31st in knowledge absorption. Moreover, in the same ranking, the UK sits 22nd in terms of Business Sophistication, indicating that despite our innovation prowess, the benefits of this are not translating into the wider economy and industries more generally.
Why the UK needs to invest in growing it’s Corporate Venture Capital Ecosystem
Corporate venture capital (CVC) plays a crucial role in their parent companies' innovation and the growth and future revenue this innovation can create.
Investing through a CVC would allow UK commercial enterprises to access and invest in disruptive technologies and business models that can give growth and a return on investment in the medium to long term and growth strategies by investing in promising start-ups and new technologies.
According to Bain Consulting, over the past decade, the value of deals managed by CVCs has increased more than tenfold, demonstrating the growing importance of these investments in the venture capital landscape. Between 2017 and 2020, investments by CVCs have seen a 7% increase in investments.
Countries like the USA, China, Japan, South Korea, and Brazil have created and established policies to support companies in developing corporate venture capital firms, encouraging them to invest in innovation to deliver growth and increase productivity.
A mature UK CVC ecosystem can deliver growth and find a way to create some momentum for CVC unit formation. One way to do this is to develop public-private partnerships that encourage corporations to invest alongside the government. The is a need to incentivise corporates to create CVCs and work with UK academic institutions to bring to market the innovation that the UK excels in creating.
In Germany, for example, High-Tech Gründerfonds, a public-private venture capital investment firm, has encouraged German corporates to invest in seed-stage companies. Investors in its fourth fund include 45 companies from various industries, including medium-sized businesses and family offices.
Corporates don’t just provide capital. They also share insight and expertise from their area of business and the supply chain and partners they work with.
The opportunities for international investors
For international investors, the Industrial Strategy provides a unique opportunity to tap into the UK’s burgeoning sectors. However, it’s essential to be mindful of both the risks and rewards:
Opportunities: The strategy’s focus on sectors like clean energy and life sciences aligns with global trends, making the UK an attractive destination for long-term investments in sustainable technologies and health innovations.
Risks: Investors should remain cautious of potential policy volatility or skills shortages, particularly in emerging sectors like AI and digital technologies. Engaging with the Green Paper process allows investors to voice their concerns and influence the strategy’s development.
How Investors Can Contribute To The Green Paper:
Submit Feedback: International investors can submit their views through the consultation process, ensuring their priorities are reflected in the final strategy.
Engage in Public-Private Partnerships: Explore opportunities for joint ventures with UK businesses and academic institutions, which can provide insights into local market conditions and regulatory changes.
Maximising Opportunities, Mitigating Risks
The UK’s Industrial Strategy presents a transformative opportunity for businesses and international investors alike. However, to fully unlock the potential of this strategy, it is essential to address key challenges, particularly around skills development and working collaboratively with UK and international public and private stakeholders. By actively participating in the consultation process, collaborating across sectors, and investing in education and skills, businesses can help shape a strategy that delivers sustainable, long-term growth for the UK and secures its place on the global stage. There is a need to connect the dots.
In summary, the Industrial Strategy is not just a framework for economic growth - it’s a blueprint for long-term prosperity that must be underpinned by careful planning and robust stakeholder engagement. Businesses and international investors have a significant role to play in shaping this vision. However, they must be mindful of the risks associated with skills shortages, policy volatility, and the need for ongoing innovation.
For the UK to maximise the opportunities presented in its new Industrial Strategy, it must ensure that education and workforce development are integrated into its broader goals. A well-trained, agile workforce will be vital to unlocking the value in the high-growth sectors identified - such as clean energy, life sciences, and digital technologies. Without this, the UK risks falling behind in the global competition for investment and innovation.
International investors should view the Industrial Strategy as a long-term opportunity to align their investments with emerging UK sectors that promise stable returns and sustained growth. By engaging with the Green Paper consultation process, investors can contribute to shaping the future policy landscape in ways that support both domestic and international business goals.
The UK, though, needs a mature CVC ecosystem that incentivises UK corporates, SMEs, and large corporates to invest in the opportunities that they will benefit from.
The path forward will require collaboration, continuous and collaborative dialogue, and a commitment to building an inclusive, innovative economy. By focusing on trust, reputation, and shared objectives, business leaders and policymakers can deliver an Industrial Strategy that fosters both economic resilience, global competitiveness and improved work and living standards for the UK.
