Looking ahead to the industrial strategy

Work is accelerating on the government’s modern industrial strategy, due this Spring – and the IoD recently met senior officials from the Department of Business and Trade.

There’s a huge amount riding on the strategy. It will be the centrepiece of the government’s economic and business policy for the decade ahead – an attempt to deliver a “credible, 10-year plan to deliver the certainty and stability businesses need to invest in the high growth sectors that will drive our growth mission,” as Rachel Reeves and business secretary Jonathan Reynolds have described it.

A long-term commitment to creating the right conditions for businesses to thrive is welcome. Yet the industrial strategy will also have a near-term impact. It should be a major opportunity to boost business confidence – which remains dismally low, as the IoD’s Policy Voice survey shows.

If it is to succeed in that task, it must avoid two major risks.

The first is falling short of expectations. After the negative business response to the October Budget, there’s real pressure on the industrial strategy to deliver on ministers’ rhetoric on growth. If it proves less ambitious than advertised, it could be a major blow to already-fragile business confidence.

The second, related, risk derives from the government’s focus on eight “growth-driving” sectors: advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services. These are undoubtedly important – yet if the strategy speaks only to these areas, other sectors may be left wondering what the government will do for them.

Of course, the big challenge in all of this is the weakness of the public finances. There’s no scope for throwing money at key sectors in the vein of Joe Biden’s Inflation Reduction Act – nor for Trump-style tax cuts. The UK government needs to think carefully about how it uses its limited resources to best effect – and how it ‘sells’ the strategy to business.

Time will tell how far it succeeds on that front. But for now, it’s worth noting three important aspects of how the strategy is being developed.

First, it draws on a strong sense of place. Ministers and officials are working with regional, local, and devolved government partners, including metro mayors, to ensure the strategy supports growth across the UK.

Second, there has been a recognition of the need to listen to business – and to support disruptive, innovative newcomers, not just industry incumbents. It’s surely right to think about how their interests may differ and how they can be balanced.

Third, the industrial strategy doesn’t sit in isolation. The link to trade strategy is particularly important. This week saw Jonathan Reynolds head to New Delhi to restart free trade talks with India. The era of global free trade may be ending as American tariffs bite, but targeted trade deals could be a valuable boost for the UK – even if the bigger priority, as IoD members tell us, remains resetting the EU trading relationship.

Business confidence is in a rut, and low expectations can become self-fulfilling. The industrial strategy is a critical opportunity to break out of that loop – but it carries substantial risks, too.

Find out more about the IoD Policy Voice survey and read the latest results here