New blog: UK Industrial Strategy: what's worked, what hasn't, and what needs to change - by Thomas Aubrey
Since the financial crisis, UK industrial strategy has seen numerous changes. Unfortunately, this policy instability has contributed to the UK's poor growth performance.
One consistent aspect of industrial policy has been the focus on growing high-value sectors such as aerospace, life sciences, automotive, & energy. But is the current approach enough?
The results have been disappointing. Between Q2 2019 and Q2 2024, UK private sector productivity grew just 0.4%, with over half of the private sector contributing negatively. This is a poor outcome, especially compared to countries like the US.
The latest productivity data (Q2 2023–Q2 2024) reveals a 1.1% decline, with only a third of the private sector contributing positively. This decline largely reflects a shift in labor from higher to lower-value sectors, rather than stagnation in productivity within sectors.
The government’s green paper continues to target high-value sectors, but little is offered in terms of a new approach. Allocating limited funding to each sector hasn't been enough to drive real change. What’s needed is a more strategic, long-term vision.
A major issue in the UK’s industrial strategy is the lack of scale in many high-value sectors (except for financial services). For growth to truly take off, sectors must collaborate across entire supply chains and focus on innovation, not just compete for small funding pots.
The HealthTech sector provides an example of how a sector-driven, long-term growth plan can work. With a ten-year strategy focusing on exports, supply chain coordination, and net-zero goals, it aims to add 50K jobs and double sector GVA.
However, these plans can only succeed if the government creates an open regulatory environment, strengthens partnerships with the NHS, and provides better financial incentives for innovation. The sector needs both industry commitment and government support.
A successful industrial strategy needs to be bottom-up, with sector-specific, regionally tailored plans. This is key to ensuring growth is distributed across the UK’s regions, creating jobs and driving GVA where clusters of industry are already forming.
The government’s Green Paper response is due in Spring 2025, but action is needed now. A top-down, one-size-fits-all approach won't work. Instead, the focus should be on assessing the quality of sector plans and collaborating with industry to drive GVA and skilled jobs.
If the UK truly wants to revitalise productivity growth, it must focus on sector-specific plans that leverage regional strengths, foster collaboration, and ensure long-term sustainability. Only then can we expect to see meaningful change.
Read: https://lnkd.in/eC5hy8j6
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