Five key takeaways from the UK’s Modern Industrial Strategy

The government’s much anticipated Modern Industrial Strategy has been published. Offering a 10-year plan to “deliver the certainty and stability businesses need to invest in the high growth sectors that will drive our growth mission”, it reaffirms the government’s commitment to creating opportunity by accelerating growth in key sectors.

While many of the policy initiatives and spending commitments contained in the paper had previously been announced, having them brought together in a formal roadmap is welcome. But what were the key takeaways from the weighty 160-page paper?

We set out five key themes for innovative businesses.

1. Sector-based approach

As previously trailed in November in its Invest 2035 green paper, the government will focus on accelerating growth in the sectors with the “highest potential” and target the places and clusters across the UK that support them.

Eight sectors (the so called “IS-8”) have been identified:

Bespoke sector plans have been created, setting out the ambition for each sector and how it can be realised. In advanced manufacturing, for example, the ambition is to almost double annual business investment, increasing the UK’s competitive advantage in industries such as advanced materials, aerospace, agri-tech, automotive, batteries and space.

2. Commitment to innovation

Innovation has been front and centre in many of the government’s recent policy announcements and this paper makes no exception. It acknowledges the global race to attract inward investment from innovative firms while creating the conditions for home-grown companies across the eight target sectors to thrive.

Mechanisms to support this include building a tax system that encourages growth via a range of incentives such as R&D tax relief, “world-leading” capital allowances and an internationally competitive headline tax rate. Providing certainty and stability across these incentives is key, with the maintenance of the current R&D tax credit rates as confirmed in the Corporate Tax Roadmap in October 2024.

3. Greater interventionism

One overarching theme to emerge from the paper is a new government approach to supporting growth. Described in the foreword as a “more muscular approach”, the government looks set to be more interventionist than previous governments as it seeks to deliver on its promises. This will see it collaborate more closely with industry to create jobs, provide access to finance and negotiate partnerships.

We see this approach already through our work in location strategy, where we support multinational firms seeking to locate in the UK and negotiate with the government on their behalf to access targeted incentives, designed to attract inward investment.

4. Growing the UK’s national security capabilities

The paper reiterates the government’s commitment to bolstering the UK’s national security capabilities in response to heightened global insecurity and positions defence as a major catalyst for growth and innovation.

The government had already pledged a headline increase in defence spending from 2.3% to 2.5% of GDP from April 2027, with an ambition to reach 3% in the next parliament. The new document reinforces that commitment and draws together some of the initiatives that will benefit from that spending increase, including the UK Defence Innovation fund (UKDI) –allocated an initial £400m budget.

5. Harnessing digital and technology

The critical role of technology in shaping growth is clear. The paper sets out a vision for the UK, by 2035, to be one of the top three places in the world to create, invest in and scale-up a fast-growing technology business.

Six frontier technologies within the highest growth sectors will be prioritised: advanced connectivity, artificial intelligence (AI), cyber security, engineering biology, semiconductors and quantum technologies.

Backed by initiatives such as creating a more supportive regulatory environment and backing technological innovation by increasing R&D funding to £22.6 billion by 2029/30, the government aims to secure the UK’s first trillion-dollar technology business.

How ForrestBrown can support growth

As a business whose mission is to help innovative businesses to develop and grow, the government’s Modern Industrial Strategy goes to the heart of what we do. Whether you’re a tech scale up in Bristol, clean energy producer in Scotland, or a life sciences manufacturer in Cambridge, our multi-skilled team of tax, legal and industry-experienced sector experts can advise you on the opportunities relevant to your business. From accessing R&D tax relief to putting together grant applications for major funding opportunities such as the UKDI, we’re here to support you.

Let’s create growth together. Not only for your business, but for the nation too.