Modern Industrial Strategy summary

While highlighting the UK’s strengths in research and innovation, free trade, and attractiveness to global talent and capital, the strategy recognises that a ‘business-as-usual’ approach will not be enough secure UK success in an uncertain world, and that over recent decades, companies in the UK have too often been over-regulated and too risk-averse to seize opportunities for investment and growth.

The strategy covers eight key sectors (the ‘IS-8’): advanced manufacturing, creative industries, life sciences, clean energy, defence, digital and technologies, professional and business services and financial services.

These sectors will be targeted with strategic support. The government will track key measures of success (business investment, GVA, labour market outcomes, productivity growth, exports and the number of new large ‘homegrown’ businesses) across the IS-8 to measure the strategy’s impact.

The government rightly recognises that many of the barriers for the IS-8 also create frictions for other sectors, from planning delays to regulatory uncertainty. The government aims to make it easier for companies to do business and invest by:

• Tackling high electricity costs through grid connections, investment in clean energy, and more connections with the EU energy market.
• Promoting free and fair trade, including through international partnerships.
• Strengthening economic security through an uplift in defence spending.
• Expanding access to finance by increasing the British Business Bank's (BBB) capacity to £25.6bn, with £4bn in additional capital for the IS-8 and expanding the mandate of the National Wealth Fund.
• New legislation to expand the maximum size of UK Export Finance’s financial portfolio.
• £86bn investment in R&D targeted towards the IS-8.
• Expanding the commercialisation of UK data assets and extending Smart Data initiatives into relevant strategy sectors and realising the full value of public sector data.
• Enhancing skills provision to provide a skilled workforce pipeline for the IS-8 sectors.
• Reducing regulatory burdens and clearing the path to market for innovative products.
• Removing planning barriers.
• Ensuring the tax system supports growth and adhering to the Corporate Tax Roadmap published at the Autumn Budget 2024.

The government will target investment in cities and regions across the UK, including:

• A new £600m Strategic Sites Accelerator to attract investment into Industrial Strategy Zones (Investment Zones and Freeports) and new AI Growth Zones.
• A £500m Local Innovation Partnership Fund to support regional innovation.
• Close collaboration with devolved governments on flagship sectoral investments.
• Supporting Mayors and local authorities in England, including through a new £500m Mayoral Recyclable Growth Fund available to invest in local growth projects.
• Strengthening transport connections between key cities, including a Northern growth corridor, the Oxford-Cambridge Growth Corridor, rail upgrades in Wales and the Edinburgh-Glasgow Central Belt.

Sector plans

The government will take targeted action to support the highest-potential sectors over the next decade through sector plans. The plans already released that have most relevant for our industry are set out below.

We sit on the Professional Business Services Council (PBSC), the body through which DBT has been engaging with the sector. We are also represented across various thematic sub-groups, including technology, trade and skills.

The government sets out its aim for the sector to double business investment to £65bn by 2035 and will seek to deliver this through four main initiatives:

1. Reforming the business environment – via faster adoption of technology and innovation, developing a skilled workforce, entering new markets and leading international standards and regulations.
2. Backing frontier industries – by utilising automation and new technologies within accountancy, audit, tax and legal services, as well as prioritising the UK’s globally elite management consultancy firms.
3. Building regional excellence – establishing five new PBS hubs to drive national growth.
4. Forging enduring partnerships with industry – delivering joint commitments including partnerships and voluntary initiatives to support its growth and sustainability.

The sector plan includes legal services, which are described as a ‘national asset’ and ‘foundational’ to the wider economy (reflecting TheCityUK language and citing data from our legal services report). It notes challenges for the sector, including Mutual Recognition of Professional Qualifications (MRPQ) with other jurisdictions, AI upskilling and R&D, particularly for SME legal firms. It recognises that crucial investment in the physical and digital infrastructure of the courts is key to addressing backlogs and improving services. The plan commits to:

• Unequivocal respect for the rule of law and maintaining the strength of English law, including updating legislation to keep pace with new technologies
• Enhancing the attractiveness of our legal system through reform and digitisation of the courts, and further support and investment in the LawTech sector.  

All of these have been key asks of ours on behalf of members. As much of the plan restates initiatives already underway, we will continue to work with the Ministry of Justice to influence and shape the details and pace of implementation.

The government sets out its ambition for the UK to be the world’s most innovative full-service financial centre. The section on financial services outlines the key building blocks of the upcoming Financial Services Growth and Competitiveness Strategy, emphasising the sector’s role as an enabler of growth, including reference to pensions capital and boosting the UK’s capital markets.

Several sectors, e.g. asset management and wholesale services, FinTech and sustainable finance, are highlighted as those with the greatest potential to invest and grow. The strategy recognises that there is a considerable international element to that growth, both from exports and imports/inward investment. We have long called for the government to tailor the UK’s trade policy toolkit to its comparative advantages in financial and related professional services.

TheCityUK recently attended a roundtable convened by the Economic Secretary to the Treasury and underscored the need to reform the Financial Ombudsman Scheme (FOS). The sector out the conclusions of the government’s review of the FOS, which must ensure the FOS focuses on individual disputes rather than the interpretation of precedent-setting regulatory matters, thereby improving its service to consumers. The roundtable included a focus on reskilling and upskilling the financial services workforce, which is essential to bolstering financial services clusters across the UK.

We continue to engage with HM Treasury ahead of the launch of the sector plan and look forward to seeing more detailed proposals, particularly around digitalisation and how the government and regulators can accelerate the integration of key technologies such as distributed ledger technology (DLT) and digital assets, an area on which the UK risks falling behind competitor jurisdictions.

To summarise the key initiatives relating to financial services:

• Implementing the Pension Investment Review reforms to enable greater productive investment and supporting Mansion House Accord investment commitments.
• Delivered the legislation for PISCES, a new type of innovative stock exchange for companies that want to remain private for longer.
• A new concierge service through the Office for Investment to attract international firms.
• Streamlining regulation and supporting early-stage innovative firms.

This section of the strategy discusses the UK’s business environment and sets out government action to provide the conditions and stability for the IS-8 to take risks and invest confidently.

Reducing electricity costs, accelerating grid connections and promoting industrial decarbonisation

The government recognises that high electricity prices and grid connection delays are key barriers to electrification, delivery of the UK’s net-zero commitments and to competitive industrial activity. It also acknowledges the impact that volatile energy prices in the UK have on key industries and energy-intensive sectors.

In recognition of these barriers, the government has announced: 

• The British Industry Supercharger to provide price relief for the most energy-intensive companies in the IS-8 and foundational industries.
• Supporting the development of the Corporate Power Purchase Agreements (CCPA) market in the UK, as a potential route for energy consumers to secure more stable energy prices.
• Reforms to accelerate grid connection timelines for major investment projects, using regulatory levers and convening powers to reduce waiting times.

The strategy reaffirms commitment to increasing energy security and reducing electricity bills by investing in clean energy and strengthening the UK’s connection with the EU energy market. It sets out the government’s previous commitments to introduce a UK Carbon Border Adjustment Mechanism (CBAM) from January 2027 and to work towards linking the UK and EU Emissions Trading Schemes (ETS). 

The government acknowledges the importance of international partnerships and cooperation and confirms that the UK will continue to be a clean energy and climate champion. It is clear acknowledges that the transition to net zero is an economic opportunity, and the UK needs to leverage national strengths to ‘seize the economic prize of the transition’. In our submission to the Industrial Strategy Green Paper, we stressed that grid connection waiting time is a key barrier to investment in low-carbon technologies.

Promoting trade and international cooperation

The Industrial Strategy recognises that the ‘rules of trade and its multilateral architecture are being challenged’ and that the UK must adapt to this environment. Further details of the government’s approach to this will be set out in the government’s Trade Strategy.

Our submission to the Trade Strategy emphasised the need to broaden and tailor the UK’s trade policy toolkit to its comparative advantages in services, and particularly financial and related professional services. We are pleased that the government is committed to using the ‘full suite of trade tools’ to unblock barriers for UK exporters and importers. 

The UK will ‘refocus’ its overseas network, directing and resourcing Ambassadors, Trade Commissioners and regulators to open and shape priority growth markets through commercial diplomacy and private sector partnerships. We called for the UK’s overseas trade and investment network to be reconfigured to promote the UK’s services capabilities to reflect how shifts in the global centres of growth to Asia, Africa, and the Middle East are driving goods, services, and capital flows through new ‘growth corridors’. The government’s immediate priorities are to deliver on its negotiations with the US, EU, Gulf Cooperation Council, Republic of Korea, Switzerland and Turkey.

Strengthening our economic and national security

The government will launch a 12-week consultation on the UK’s inbound investment screening regime under the National Security and Investment Act (NSIA) to ‘ensure that it protects national security while minimising burdens and supporting growth’. We are pleased the government has committed to updating the 17 sensitive areas of the economy subject to mandatory notification under the regime, new exemptions, and greater transparency for the NSIA process. These were highlighted in our recent report with Freshfields on the NSIA, with recommendations to streamline the UK regime based on international best practice.

The strategy reflects many of the recommendations in our joint report with ADS Group on finance and investment for UK defence, including procurement reform to unlock greater private investment. Public co-financing institutions, such as the BBB, National Wealth Fund, UK Export Finance, and the National Security and Strategic Investment Fund, will be used more strategically to support economic and national security and resilience. TheCityUK-ADS report set out the need to provide co-financing support to de-risk investment in the UK defence industrial base. The forthcoming Defence Strategy will provide more detail.

Expanding access to finance

The commitment to a new Business Growth Service to streamline access to government support, advice and funding for SMEs is welcome. In our response to the government's small business access to finance call for evidence, we called for the establishment of a government-led single platform for SMEs to clarify finance options. We also called for innovative approaches to intellectual property and, therefore, welcome the commitment to work with the Intellectual Property Office to explore how to help businesses raise debt finance.

The planned Supply Chain Centre will contribute analysis on future finance trends and support companies navigating a challenging economic and geopolitical environment, which we highlighted as a key barrier to SMEs' demand for finance. The government plans to channel pensions capital into the UK to support the IS-8. The BBB will invest in high-growth scale-up businesses across the IS-8.

We have stressed the need to support a smooth transition from start-up to scale-up, from private to public capital markets, and from growth to main public equity markets. In our report, ‘Catalysts for Growth: Boosting UK Growth Markets’, we set out the importance of the Private Intermittent Securities and Capital Exchange System (PISCES) to support growth companies’ transition from private to public markets. We welcome the PISCES legislation and the commitment to reform capital markets and pensions investment to support innovative firms to start, scale, list, and build their future in the UK.

Driving and supporting innovation

We called on the government to ensure that the UK’s growth sectors can harness the full potential of key technologies. The government has supported this, with a commitment to driving technology and innovation throughout the Industrial Strategy, underpinned by an £86bn investment into UK R&D. AI, cyber, quantum and semiconductors are identified as frontier technologies with the greatest growth potential.

The government has committed to cutting red tape for FinTech firms and making the UK the most technologically-advanced global financial centre with fully digitalised markets, and a leading jurisdiction for FinTechs to start up, scale, and eventually list.

Key announcements include:

• £22bn R&D funding to drive innovation in our frontier industries by 2029/30. This includes £670m for quantum computing and £500m for a new R&D Missions Accelerator Programme. The government also committed to expanding the AI Research Resource, a cluster of supercomputers, by at least 20x by 2030.
• A Local Innovation Partnerships Fund will provide up to £500m to grow high-potential innovation clusters across the UK.
• A new £500m Sovereign AI Unit in government will work with the BBB to maximise the UK’s stake in frontier AI.
• An Industrial Strategy AI Adoption Fund to facilitate the development of cutting-edge AI solutions in high-growth potential firms across the IS-8.
• The SME Digital Adoption Taskforce will publish its final report this summer.
• Support for AI Growth Zones with planning approvals, access to energy, and partnerships with the private sector.
• A commitment to timely planning decisions, with a 13-week target for called-in applications, and removing further barriers to digital infrastructure.

Capitalising on the value of data

We have emphasised the importance of data as a vital asset to firms’ ability to innovate and called for the government to prioritise and promote smart data initiatives such as Open Finance. The government has committed to establishing the UK as a global leader in data-driven innovation by 2025. Key announcements include:

• £36m to support new Smart Data scheme and up to £12m investment in UK data sharing infrastructure initiatives.
• A new data valuation framework by April 2026.
• A National Data Library, backed by over £100m of government funding.

Enhancing skills and accelerating access to talent

The strategy acknowledges that the UK competes for the best global talent. A new Global Talent Taskforce, reporting to the Prime Minister’s Office and HMT, will provide a concierge service for top talent. Reform of the Global Talent and Innovator Founder visas aims to make the UK more attractive to promising top talent, particularly for frontier sectors.

We highlighted easing business mobility as a key industry priority for the UK-EU reset. The government will continue to explore ways to make it easier for British professionals to move temporarily between the UK, EU, and other jurisdictions to meet short-term business needs and service customers, supported by mutual recognition of professional qualifications agreements.

Working with the Financial Services Skills Commission, we have called on the government to support industry efforts to close domestic skills gaps. We hope to hear more on this in the Financial Services Growth and Competitiveness Strategy.

Reducing regulatory burdens

The strategy signals the government’s intention to set out an updated approach to economic regulation by the end of 2025. We are engaging with DBT to stress the need to integrate this with the new HM Treasury unit designed to challenge unnecessary regulation and progress the government’s commitment to reduce regulatory costs by 25% by the end of this parliament.

The government commits to clarifying Anti-Money Laundering and Know Your Customer requirements to support the financial services and professional and business services sectors.

Removing planning barriers and accelerating infrastructure

The government reaffirms its commitment to reforming the planning framework and providing greater certainty, confidence and stability to investors by reforming the National Planning Policy Framework (NPPF). We expect government consultation on planning policy later this year. The government will publish priority infrastructure projects in the summer.

Delivering a tax system that supports growth

The government’s tax roadmap is restated: a headline rate of 25% corporation tax, ‘world-leading’ capital allowances, and a range of R&D tax credits. It recognises ‘more can be done to reform and simplify the tax and customs systems, to reduce burdens on businesses and provide them with the stability and certainty they need to make long-term investment decisions and continue importing and exporting’.

The government will explore potential further change through consultations and engagement to foster a positive, dynamic environment for entrepreneurs and scale-ups, which could suggest potential movement on stamp duty on share trading. It will also  at all available levers to deliver change at the Budget in Autumn 2025, including the tax environment, to support the Industrial Strategy.

The strategy places strong emphasis on place and the role of devolved leaders in regions and nations in driving growth. This reflects our long-standing work in this area, with references to financial and related professional services hubs in Edinburgh, Leeds and Manchester.

Several proposals align with our long-standing policy positions:

• Backing Mayors to implement their plans by giving them more powers over strategic planning, business support, skills, and transport, underpinned by flexible Integrated Settlements.
• Relocating civil service roles.
• Building a stronger skills pipeline for local employers, supporting ‘employer representative bodies and Mayors to develop Local Skills Improvement Plans’.
• Reforming the Local Government Pension Scheme in England and Wales to focus on opportunities that support local and regional growth. We called on the government to unlock this potential for greater investment in local projects.

We will engage with and influence several new schemes, including the Strategic Investment Opportunities Unit, which reflects our calls for a ‘National Investment Broker’; a Strategic Sites Accelerator to develop critical projects; a Connections Accelerator Service to work with the devolved nations in equipping projects to grow and new Professional and Business Services Hubs.

Creating an enduring partnership with business

The government recognises that previous industrial strategies and related reforms have been subject to frequent change and ineffective cross-government coordination, which creates uncertainty and a lack of confidence, thereby deterring investment.

We welcome the strong emphasis in the strategy on building an ‘enduring’ partnership between the state and the private sector. We will continue to push for a close working partnership between government, industry, regulators, and national and regional stakeholders to harness a collective effort to maximise the impact of the strategy.

We are engaging with the Industrial Strategy Advisory Council and look forward to the government taking forward the necessary legislation to put the Industrial Strategy Council (ISC) on a statutory footing as an independent body. Doing so is an important signal of the focus on longevity and consistency required to deliver the strategy.

The Council’s independence will be important in helping to transparently and robustly evaluate the progress and impact of the strategy, as set out in the measurement framework in the Technical Annex to the strategy. The Council will gather operational data from departments and public bodies to monitor delivery of individual policies, and economic indicators to understand relevant developments and trends at the economy-wide, sector and place level. These include: business investment, Gross Value Added (GVA), productivity growth, trade exports, labour markets and the number of large ‘home-grown’ firms.