The industrial strategy: a year in review
The Industrial Strategy Advisory Council – the advisory body established to support and feed back on the development of the government’s industrial strategy – has released its first ever annual report, following its launch last year. The report takes stock of progress so far as well as identifying future priorities.
Some of the council’s strongest words are reserved for the growing financial instability of the higher education sector, and the material risk that this poses to the strategy’s delivery. It’s suggested that an “urgent review” of the sector, and the post-compulsory skills system more generally, is needed – this call is covered in more depth on a separate article for Wonkhe.
Overall, the annual report makes the case that “faster, more ambitious and more coordinated action” on tackling barriers to investment in the UK is required if the strategy’s ambitions are to be achieved. The council recommends that the government take the opportunity of the forthcoming ten-year plan and rewiring the state policy paper to reaffirm the industrial strategy as the “national framework for reindustrialisation.”
This meshes well with comments from business secretary Jonathan Reynolds during a recent parliamentary committee hearing – he said that in his opinion “reindustrialisation is based on the industrial strategy and the IS-8” (the IS-8 being the eight priority sectors identified in the original white paper: advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services). According to Reynolds, the industrial strategy is to be used as a “tool” to make reindustrialisation a reality.
Reflecting on progress to date, the council argues that government signalling about the strategy’s importance is essential to its success. It says that there is “strong early evidence” that some arm’s length bodies – including UKRI and Skills England – are shifting their mandates to align with the IS-8 sectors, and that this is also true of Labour’s public financial institutions (or PuFins): the British Business Bank’s new five-year mandate explicitly links its objectives to the priority sectors, and the National Wealth Fund is also pursuing closer alignment.
This is not the case across the whole of government, however, the council suggests – a lack of join-up and absence of “sustained prioritisation” in some departments is said to be undermining the industrial strategy’s central message, namely that the government is serious about backing high-potential sectors and frontier technologies.
The council – in common with many contemporary policymakers – is also concerned about UK research strengths translating into commercial outputs. For the life sciences sector in particular, it is observed that the key challenge is to “convert the UK’s scientific excellence into stronger innovation, IP and scale-up outcomes.”
On a related note, the annual report welcomes the government-backed Scale-up Fund and the Mansion House Accord on pension investment – but worries that the pace of implementation is too slow.
For the future
One of the Industrial Strategy Advisory Council’s recommendations for future work is the development of a “multi-layered monitoring and evaluation framework” for the strategy – it suggests that the current metrics the government is using (which include productivity, employment, and exports) work over a long-term timeframe, whereas more immediate progress tracking is also needed.
One such indicator could be private investment leveraged through UKRI programmes. Others might include SME participation in innovation programmes, UK industrial electricity costs, or foreign direct investment flows. Where possible, regional variation would also be monitored.
The advisory council also makes the case for the industrial strategy to place much greater emphasis on artificial intelligence, saying that the pace of change in AI diffusion and adoption even since the strategy was launched in 2025 must be recognised:
“AI represents a seismic shift bringing both opportunities and threats, and should be recognised as a fundamental cross-cutting pillar of the IS given its economic and productivity impacts across all IS sectors.”
It is proposed that this would mean focusing on areas such as cybersecurity, regulation, and workforce skills. The council says that it is planning to monitor AI adoption and integration across the different IS-8 sectors.
Other recommendations for forthcoming work include greater coordination on skills policy, further progress on planning reform, and a “more interventionist approach to economic resilience.” This would see the government systematically identify the inputs which the UK economy depends on, and put in place targeted strategies to ensure their security.