From strategy to strength: making the UK’s industrial vision a reality

Our experts assess what the new Industrial Strategy gets right, where it must go further, and what it will take to ensure the UK doesn’t just design the future but builds it.

The publication of the UK’s new Industrial Strategy is an important and welcome step. It reflects growing recognition that building a stronger, more resilient, and more inclusive economy will depend on the revival and modernisation of the UK’s manufacturing base.

Inputs from Cambridge Industrial Innovation Policy is reflected in the strategy, from our work on international research and innovation collaboration in the advanced manufacturing and materials sector, our ongoing work with the Department for Business and Trade on the changing value of UK manufacturing sectors, and the Women in Manufacturing UK Initiative led by members of our team.

But while the strategy sets the right direction in many areas, it now faces a familiar test: can promising policy turn into lasting performance?

To succeed, the industrial strategy must restore UK industrial competitiveness

Dr Carlos López-Gómez, Head of Policy Links Unit

The most fundamental challenge facing the UK is the erosion of competitiveness in high-value-added industries. Over the past decade, some of the sharpest declines in global export share have occurred in sectors where the UK has traditionally been strong.

As highlighted in the UK Innovation Report, the UK’s global market share across a set of 10 advanced industries – including motor vehicles, pharmaceuticals, chemicals, machinery, electrical equipment, and computers – has almost halved in value-added terms over the past 20 years, falling from 4.4% in 2000 to 2.6% in 2020. Some of the remaining high-value sectors in the UK now face existential threats amid intensifying global competition, raising concerns about their long-term sustainability.

While the Industrial Strategy’s focus on investment is right, investment alone will not suffice. The clearest measure of success must be the UK’s ability to regain competitiveness in key sectors. At the heart of the strategy must be a commitment to reversing the long-term decline in industrial performance and rebuilding global market share. Establishing concrete targets for value-added and export growth, benchmarked against leading international competitors, will be essential to guide action and track progress.

Ten years from now, success should be visible in a globally competitive UK manufacturing base, underpinned by strong ties to world-class research and characterised by high-value, specialised jobs distributed across all regions of the country.

Backing innovation: why long-term R&D investment is critical for UK growth

Dr Michele Palladino, Principal Policy Analyst

The UK’s Industrial Strategy places innovation at the heart of its approach to achieving sustained economic growth, creating high-quality jobs, and raising living standards. To drive innovation, the Strategy commits the UK Government to investing £86 billion in R&D to support private investment in cutting-edge research, technologies, and commercial applications. The Spending Review 2025 confirmed the UK Government R&D expenditure will increase from £20.4 billion in 2025-26 to £22.6 billion per year by 2029-30. An additional £3 billion in R&D and capital funding over the next four years has been allocated to the advanced manufacturing sector, one of the high-growth sectors identified in the Industrial Strategy.

The increase in Government expenditure on research and development (R&D) is welcome, particularly in a country like the UK that still lags behind global innovation leaders when R&D expenditure is concerned. For example, in 2022 the UK R&D expenditure as a percentage of the Gross Domestic Product (GDP) was 2.77%, slightly above the OECD average of 2.73%, but well behind top-performing countries like Korea (5.21%), the US (3.59%), Japan (3.41%), and Germany (3.13%).

However, the UK Government’s commitment to ramping up R&D investment is far from new. Under Theresa May’s administration, the 2017 Industrial Strategy set a bold vision to raise R&D expenditure to 2.4% of GDP by 2027 – up from 1.7% at the time. That ambition was reinforced in the March 2020 Budget, where the Johnson government pledged to increase public R&D spending to £22 billion annually by 2024/25.

Public R&D spending reached £17.4 billion in 2023 and is projected (according to the Spending Review) to rise to £20.4 billion by 2025. Interestingly, the headline 2.4% target was technically surpassed as early as 2019, with revised figures estimating R&D intensity at 2.7% of GDP. This apparent leap stemmed not from a sudden surge in investment, but from methodological revisions introduced by the ONS in 2022 – correcting long-standing underestimations, particularly in the business and higher education sectors.

Against this backdrop, the government’s recent commitment of £3 billion in R&D and capital funding for advanced manufacturing over four years warrants scrutiny. According to the Advanced Manufacturing Sector Plan, UK businesses in this sector spent £12.9 billion on R&D in 2023 – accounting for 25.7% of total business R&D. Of the £50 billion in total business R&D that year, £2.8 billion was directly funded by the government. While confidentiality constraints limit precise sector-level breakdowns, a proportional estimate suggests that advanced manufacturing may have received around £720 million in public R&D support in 2023 alone – placing the new £3 billion pledge over four years broadly in line with existing funding levels, rather than signalling a transformative shift.

Taken together, these developments underscore a clear strategic trajectory: successive UK governments have prioritised R&D as a lever for economic growth, productivity, and global competitiveness. Yet the recent announcements appear to reflect continuity rather than escalation. In the absence of a new funding uplift beyond current trajectories, the commitments risk being perceived as rebranding rather than reinvention.

R&D funding and government investment in a specific sector are essential, but further efforts are necessary, along with a significant boost in private investment. As demonstrated in the latest editions of the UK Innovation Report, while the UK excels in scientific output – reflected in top university rankings and publication volume – it falls behind in its ability to turn research into commercial success, with relatively low performance in development, scale-up and value added, thereby weakening its global competitiveness.

The Industrial Strategy is a crucial step in bridging the gap between scientific excellence and industrial performance. By increasing investment in research and development and actively supporting high-growth sectors such as advanced manufacturing, the government has the potential to transform scientific knowledge into tangible commercial success, which could significantly enhance the country’s innovation and economic growth.

International R&D collaboration as a key driver of the UK’s frontier industries

Dr David Leal-Ayala, Deputy Head of Policy Links Unit and Zongshuai Fan, Policy Analyst

The UK has a strong track record of bilateral and multilateral collaboration in research and innovation. As highlighted in the UK Industrial Strategy, the UK has established relevant collaboration agreements with countries such as Japan and Saudi Arabia in identified frontier industries, including quantum science and technology, as well as in the Industrial Strategy Sectors (IS-8), which encompass advanced manufacturing, clean energy, and life sciences.

Notably, the Digital and Technology Sector Plan outlines an approach to “secure the benefits of international collaboration with scientists, innovators, and entrepreneurs pushing the boundaries of knowledge”. It identifies strengthening global partnerships as a strategic intervention, with one key metric for progress being the number of international partnerships and collaborations.

As summarised in our report for Innovate UK, cited in the UK Industrial Strategy, international R&D collaboration can benefit participating countries in several ways. These include strengthening scientific and innovation capabilities, enhancing industrial capabilities and productivity, contributing to the resolution of global societal challenges, supporting foreign policy objectives and shaping international R&D governance.

To ensure long-term value capture for the UK economy, our report recommends that future international R&D collaborations could consider the following design principles:

• Demonstrating ‘win-win’ collaboration: To show how international R&D collaboration can bring mutual benefits to all partners involved, considering differences in technological maturity and supply chain specialisation, with a particular emphasis on how the UK can capture value.
• Moving beyond value creation to ensure value capture: To go beyond value-creation metrics and outline specific pathways to capturing value from a UK industry perspective – such as IP creation, developing new workforce skills, or domestic manufacturing of next-generation products.
• Prioritising a variety of manufacturing-related R&D domains: To support a broad mix of manufacturing-related R&D, including production technologies; manufacturability of emerging technology; manufacturing-enabling R&D, with particular emphasis on systems integration, engineering design, and virtual product development and validation.
• Considering national contexts, alignment and trust: To build partnerships based on trust among partners, a track record of collaboration, and an understanding of the partner country’s institutional, industrial, and cultural context, potentially through international missions.
• Advancing towards a systemic approach to international R&D collaboration: To institutionalise the support for international R&D collaboration by leveraging UK public research organisations (e.g. Catapult centres), business groups, international science networks (e.g. the Science and Innovation Network [SIN]), and government foresight studies (such as those produced by the Government Office for Science (GO-Science).

The UK Industrial Strategy aims to make the UK the best place to invest in and grow a business. In this context, international R&D collaboration offers significant opportunities for the UK to enhance its global standing in emerging technological developments and boost its industrial competitiveness.

A diverse and inclusive workforce to support business and economic growth

Dr Jennifer Castañeda-Navarrete, Principal Policy Analyst

The underrepresentation of women and other sociodemographic groups across industries leads to the underdevelopment, underutilisation, and misallocation of valuable talent, negatively impacting innovation, productivity and economic growth.

Women’s representation in the workforce is often lower in the most productive industries, yet gender disparities are seldom prioritised in industrial and innovation strategies. The UK’s Industrial Strategy stands out in this regard, recognising workforce diversity and inclusion as critical drivers of business performance and economic growth. It explicitly promotes evidence-based initiatives, to address these imbalances and support a more inclusive industrial future.

Sector plans, such as the Advanced Manufacturing Sector Plan, embed this priority through concrete commitments and measurable targets to improve diversity and inclusion across the workforce, including and Equality Charter and the target of ‘35 by 35’ to increase women’s representation in the UK manufacturing sector to 35% by 2035, aligned with that from the Women in Manufacturing UK initiative.

Demographic shifts, technological change, and the green transition are reshaping the skills demanded by the labour market. As businesses face increasing difficulty filling vacancies, greater workforce diversity and inclusion can play a vital role in attracting and retaining the talent needed to drive innovation and competitiveness.

Our previous InterAct-funded research highlights the powerful role that perceptions play in shaping career choices, noting that outdated views of manufacturing can discourage new talent from entering the sector. The Advanced Manufacturing Sector Plan acknowledges this challenge and outlines measures to address it, including upskilling careers advisers, enhancing local outreach, and promoting high-skilled opportunities through Jobcentres and the new Jobs and Careers Service.

Embedding diversity and inclusion in the UK Industrial Strategy and Sector Plans is not only essential for addressing skills shortages, but fundamental to securing a more innovative, competitive, and regionally balanced economy.

Boosting regional competitiveness via technology adoption

Dr Mateus Labrunie, Policy Analyst

The UK government’s renewed focus on technology adoption in its new Industrial Strategy is a welcome development. The proposed expansion of the Made Smarter Adoption programme, alongside the creation of new robotics hubs and a dedicated AI Adoption Fund, shows a recognition that improving productivity and competitiveness hinges not just on technological invention, but on its widespread adoption across the broader economy. The commitment to coordinating adoption efforts across departments and sectors, and to strengthening the evidence base through monitoring and evaluation, also points in the right direction. Overall, the government appears to be building on lessons from past initiatives and progressing towards a more comprehensive and proactive approach to industrial modernisation.

That said, there are areas where these proposals could be further strengthened. Our review of the Made Smarter programme revealed that many SMEs require basic improvements—such as enhanced production processes and improved energy efficiency—before they can fully benefit from advanced digital technologies. Broadening the remit of Made Smarter to include lean and green manufacturing support would address this critical need and make the programme more accessible. Additionally, rather than launching three separate schemes—Made Smarter Adoption, robotics hubs, and the AI Adoption Fund—there may be value in consolidating these under a unified programme. This could reduce fragmentation, streamline delivery, and make it easier for businesses to engage. Furthermore, drawing on lessons from the Help to Grow: Digital experience, the government should allow firms to identify and pursue the technology solutions most appropriate to their needs, rather than promoting a predetermined set of solutions.

A further challenge lies in the delivery capacity of these programmes, particularly at the local level. Many SMEs benefit most from hands-on, tailored support, which cannot be easily replaced by online guidance or national-level initiatives. One reason why previous schemes, such as Help to Grow: Digital, struggled to scale was the limited availability of local institutions with the necessary capabilities. The strategy’s broader focus on supporting UK regions and clusters offers a real opportunity to address this gap. For example, aligning support for technology adoption with the proposed 10-year Local Growth Plans and the increased backing for Mayors and local authorities could help strengthen the institutional infrastructure for delivery at the regional level. Making technology adoption a key part of the government’s regional competitiveness plan would not only support firms directly but also create a more resilient and innovative industrial ecosystem across the country.