Everything You Need to Know About the UK's Industrial Strategy

Andy Owen

Partner

Date published: 03/07/2025

Date last reviewed: 03/07/2025

With British manufacturing still facing a major skills shortage as well as rising costs, is this the policy the industry has been waiting for?

The UK government unveiled its ambitious (and long-awaited) Modern Industrial Strategy; a ten-year roadmap designed to boost British industry and ensure the UK remains a global leader in manufacturing and innovation.

At its core, the strategy aims to address critical challenges that have long hindered the UK’s competitiveness, from high energy costs, fragmented supply chains, an ongoing skills gap, and regulatory complexities. The aim is clear: create a robust business environment that attracts investment and promotes sustained economic growth across the nation.

Industrial Strategy highlights:

• Reduced electricity costs for energy-intensive sectors.

• £4.3 billion Industrial Strategy Growth Capital initiative, focusing on eight key sectors including advanced manufacturing, clean energy, digital technologies, and life sciences.

• £2.6 billion funding for UK entrepreneurs to support local innovation.

• Forecasted to raise c.£12 billion in private investment, further supporting smaller business funding.

• Establishment of a Supply Chain Centre to reinforce domestic supply chains.

• Launch of new Nations and Regions Investment Funds, to boost support nationwide.

Jonathan Reynolds MP, Secretary of State for Business and Trade has stated that: “This won’t just be a talking point for a week, a month or a year; it’ll be something that in ten years’ time we can look back on as an important milestone for this industry.”

Energy costs & decarbonisation

At the heart of the Industrial Strategy is the reduction in energy costs for major consumers, something the manufacturing industry in particular has been crying out for, although this won't be in effect for some time.

From 2027, the government will implement the British Industrial Competitiveness Scheme, slashing sky-high electricity costs by up to £40 per megawatt hour for over 7,000 electricity-intensive businesses. Aiming to align the UK with its international counterparts, the scheme will reduce costs for key sectors such as automotive, aerospace, and pharmaceuticals.

However, there are concerns that implementing a two-year consultation period, and therefore preventing businesses from seeing a benefit until 2027, will have little impact on the energy cost crisis manufacturers are facing right now.

Beyond cost-cutting, the strategy supports a shift towards net zero by accelerating grid connection timelines and investing in cleaner energy sources. A new 'Connections Accelerator Service' and regulatory reforms are also set to halve current waiting times, expediting infrastructure projects that are crucial for future manufacturing operations.

Advanced manufacturing & automation

Central to the strategy is a significant £4.3 billion commitment to advanced manufacturing. Specifically targeting automation and digitalisation, this move highlights the recognition for automation’s role in ramping up productivity for the industry.

With the ambition of positioning the UK as the top global destination for starting and expanding manufacturing businesses by 2035, the strategy aims to nearly double annual overall business investment from £21 billion to £39 billion.

Some of the key initiatives dedicated to supporting manufacturing include:

• Innovation & commercialisation: Committing up to £4.3 billion to spur innovation, automation, digitisation, and commercialisation – with up to £2.8 billion allocated to R&D over the next five years.

• Skills development: Introduction of an upskilling and reskilling programme tailored to manufacturing needs, coupled with wider reforms and a £100 million engineering skills package.

• Robotics & automation: Expansion of the Made Smarter Adoption programme for SMEs and £40 million initial funding for new Robotics Adoption Hubs.

• Regulatory improvements: Fully activating the Automated Vehicles Act to facilitate the adoption of new technologies, including pioneering automated vehicles.

• Supply chain resilience: Development of foundational industries vital to manufacturing, including a planned steel strategy and enhancement of the Critical Minerals Intelligence Centre.

Regional investment & international trade

The Industrial Strategy explicitly addresses regional disparities by committing £600 million to a new Strategic Sites Accelerator, proactively identifying and preparing investable sites across the UK.

Coupled with initiatives like the £500 million Local Innovation Partnerships Fund, this will bolster regional innovation, job creation, and skills development, ensuring the economic benefits are widely shared.

Global trade is crucial for ramping up British industry, and the strategy highlights the importance of robust international partnerships. New trade agreements with major economies, including enhanced cooperation with the EU and strategic partnerships with Japan and the US, are set to significantly expand export opportunities for UK manufacturers.

Leveraging the strategy

The new Industrial Strategy presents a significant shift toward collaboration between government and industry.

Promising a practical, future-focused approach to fostering economic growth and resilience, Chancellor Rachel Reeves said it will “see billions of pounds for investment and cutting-edge tech, ease energy costs, and upskill the nation”.

For manufacturers and businesses across the UK, understanding and leveraging these strategic initiatives will be vital. To fully realise the potential of this policy, companies must actively engage with the outlined opportunities – from embracing automation to tapping into new funding streams.