Unpacking the UK's Bold Economic Blueprint

The UK economy stands at a crossroads, and the government's newly unveiled Modern Industrial Strategy represents one of the most ambitious economic blueprints in decades. This episode of Chain Reaction takes you deep into the mechanics of this sweeping 10-year plan designed to transform Britain into "the best country in the world to invest in."

At the heart of this strategy are eight high-growth sectors collectively representing 32% of the UK economy - from advanced manufacturing and clean energy to digital technologies and life sciences. Workers in these targeted industries already earn nearly £8,000 more annually than those in other sectors, highlighting their potential to drive inclusive growth. The plan's architecture rests on four pillars: creating business stability, supporting regional development, targeting sector-specific investment, and fostering enduring partnerships with industry.

Perhaps most striking is the scale of commitment - £86 billion for research and development, a pledge to cut regulatory burdens by 25%, and ambitious targets like creating the UK's first trillion-dollar tech company. Yet challenges loom large. Britain's industrial electricity costs remain four to five times higher than American competitors, productivity growth has stagnated for years, and supply chain vulnerabilities persist despite the strategy's promises. While business groups have cautiously welcomed the plan, questions remain about implementation and whether crucial sectors like logistics have received sufficient attention. Whether this strategy will finally solve Britain's productivity puzzle depends entirely on execution, but as we note in our analysis - at least there's finally a plan. That alone represents progress after years of economic uncertainty.

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Chapters

• 0:00 Introduction to Chain Reaction
• 0:31 UK Modern Industrial Strategy Overview
• 2:31 The IS-8 Growth Sectors
• 3:23 Four Core Strategy Pillars
• 12:40 Industry Reactions and Analysis
• 16:35 New Era Challenges and Opportunities
• 19:44 Conclusion and Final Thoughts

Transcript

Tony Hines: 0:00

Hello and welcome to this week's edition of Chain Reaction, your go-to listening experience if you want to know about what's happening in global trade, global supply chains and all things business. I'm Tony Hines and we're going to dive into some topics of importance that have come into the news this week. So stick around, stay tuned, stay informed. Subscribe to Chain Reaction. You'll be first to know when new episodes are out. Are you sitting comfortably? And then let's get started. Welcome back to the podcast.

Tony Hines: 0:31

Today we're diving into a crucial document for the future of the UK economy the UK's Modern Industrial Strategy. Published in June 2025 by the Department for Business and Trade, this comprehensive policy paper, officially known as CP 1337, lays out the government's ambition for its long-term plan. The Prime Minister, Sir Kier Starmer, chancellor Rachel Reeves and Secretary of State for Business and Trade, Jonathan Reynolds highlight that the world is entering a new, more volatile volatile era, but also oneke i ; with enormous possibilities due to technological advances in areas life sciences, clean energy and artificial intelligence. British businesses, invest in comparative advantages and take calculated risks to drive growth and productivity. At its heart, this is a robust, strategic and unashamedly long-term plan, specifically a 10-year commitment to make the UK the best country in the world to invest in. It's described as a whole government effort focusing on eight high growth sectors, known as the IS-8, which are seen as essential for creating wealth, jobs and higher wages across the country. So what are these eight growth-driving sectors? Well, these are they Advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences and professional and business services. These IS8 sectors collectively represent 32% of the UK economy. They are chosen for their potential to drive inclusive, sustainable and resilient growth, create well-paid jobs, seize the opportunities of the net zero transition and foster superstar firms that can project global influence. In fact, workers in the ISH sectors earn, on average, £7,900 a year more than those in other industries.

Tony Hines: 3:17

The strategy is built on four core pillars, each addressing specific areas to boost the UK's economic dynamism. Firstly, ease, speed and long-term stability for business. The government aims to significantly reduce high industrial electricity costs and accelerate grid connections, which have been major barriers to investment. And if you want to see the evidence for that, I had a piece a few weeks ago that talked about the price of energy, and the price of energy in the United Kingdom is four or five times more than it is in the United States per megawatt hour. It's about 400 and something dollars per megawatt hour in the UK, as opposed to the United States, which is about $80 per megawatt hour, and the UK is bottom of a long list.

Tony Hines: 4:08

So this is an important strategic objective. It will promote free and fair trade through strong international partnerships, securing new and improved trading arrangements in a volatile global environment. Economic security will be strengthened through an uplift in defence spending, strategic investments in critical supply chains and energy security. Access to finance will be expanded by leveraging institutions like the British Business Bank, which will receive an additional £4 billion for the IS-8, and the National Wealth Fund, capitalised with £27.8 billion, to support growth. A record £86 billion investment in UK research and development will drive innovation, particularly targeting the IS-8, with a focus on cutting-edge research and commercial applications. The value of UK data will be capitalized by treating it as an economic asset, extending smart data initiatives and establishing a clear framework for valuing and licensing public sector data. Skills and access to talent will be enhanced by reforming the skills and employment support system to create a strong pipeline for the IS-8, increasing technology training and introducing a visa system that attracts talented individuals.

Tony Hines: 5:31

Regulatory burdens will be reduced, with a commitment to cut the administrative costs of regulation for businesses by 25%, and a new Regulatory Innovation Office will clear pathways for innovative products. I think those regulatory burdens they're talking about is all the red tape and bureaucracy that's involved, and if you look at a previous episode I did on red tape, you can see how important it is to actually get rid of that red tape and all the barriers to trade it involves. So that's a laudable objective. The barriers to trade it involves so that's a laudable objective. Planning barriers will be removed, with a focus on fast-tracking decisions for critical infrastructure projects and backing transformative developments. The tax system will support growth, maintaining a corporate tax rate capped at 25% and continuing features like full expensing, again important to attract investment.

Tony Hines: 6:26

Secondly, support the UK city regions and clusters. The strategy recognises that the national economic growth depends on increasing productivity in all parts of the UK. Productivity has been a big issue for many, many years and it needs significant improvement. Many years and it needs significant improvement. Over £600 million will be invested in a new strategic sites accelerator to bring more investable sites to the market faster, including through land remediation and anticipatory grid capacity. The grid needs strengthening, as we know, especially with everything happening in the changing electricity markets and the demand for EVs as they increase, support for industrial strategy zones and new AI growth zones will attract investment. Local business environments will be strengthened with £500 million of Local Innovation Partnerships Fund and expertise from national finance institutions. The government pledges to renew partnerships with Scotland, wales and Northern Ireland, coordinating with devolved governments and supporting flagship sectoral investments like the Acorn CCUS project in Scotland and a £750 million supercomputer at the University of Edinburgh. Mers and local authorities in England will receive support, including a new £500 million MIRAL Recyclable Growth Fund for local growth projects. That's a kind of devolvement of budget that they're talking about here, and that's probably a good thing. Connections between city regions and clusters will be strengthened, including a growth corridor across northern city regions and deepening support for the Oxford to Cambridge growth corridor.

Tony Hines: 8:17

Targeted action to transform our highest potential sectors is. The third pillar is to nearly double business investment to £39 billion per year by 2035, backed by £4.3 billion in funding, including £2.8 billion for research and development. Clean energy industries aim to become a manufacturing and innovation superpower, with investment at least doubling to over £30 billion per year by 2035. This includes a £1 billion clean energy supply chain fund. The creative industries seek to significantly increase business investment to £31bn by 2035, supported by a £150m Creative Places Growth Fund and a new Creative Content Exchange.

Tony Hines: 9:08

Defence aims for the UK to be Europe's leading defence exporter, reducing the time to contract and transforming into an industrial superpower For digital and technologies. The vision is for the UK to be a leading European hub for tech businesses, aiming for the UK's first trillion-dollar technology business and leveraging £3 of private R&D for every pound of public funding. So they want to crowd in private funding here. Over £500 million is allocated to a new sovereign AI unit In financial services that's set to be the world's most innovative full-service financial centre by 2035, with reforms to regulate for growth and open up more private capital. Life sciences aims to be the leading European economy by 2030, and the third most important globally by 2035, supported by up to £600 million for a health data research service. Professional and business services plans to double business investment to £65 billion by 2035, focusing on tech adoption and AI integration.

Tony Hines: 10:24

The strategy also explicitly aims to strengthen resilience of all IS8 sectors by supporting foundational industries like steel, chemicals, construction, ports and electricity networks. And, fourthly, creating an enduring partnership with business. This involves active co-investment with industry to de-risk opportunities and incentivise private capital. The government's procurement power will be used strategically to strengthen domestic supply chains and create good quality local jobs. A first-class concierge service through the Office for Investment will make it smoother for important investors to navigate the UK landscape. Support for small and medium-sized businesses will be improved with a new business growth service to streamline access to government support, advice and funding. Finally, strong pro-growth institutions will be established, including a permanent industrial strategy council enshrined in law, to provide independent insight and advice and oversee continuous monitoring and evaluation. The success of the strategy will be tracked using key measures across the whole economy, the IS-8 and specific places. These key performance indicators include business investment, gross value added, employment and wages, productivity growth and exports, as well as the number of new large homegrown businesses.

Tony Hines: 11:57

In essence, the UK's modern industrial strategy is a fundamental commitment to placing private business, entrepreneurship and innovation at the heart of the UK's renewal, with the state playing a strategic, active role beyond just macroeconomic stability. It's a long-term plan to build a proud, high-skilled, economically vibrant and fairer country. Well, there's a lot to like about this modern industrial strategy by the UK government. It's ambitious, it's long-term, it's thoughtful and it's joined up. It's probably the first time we've had a decent industrial strategy for many, many years in the United Kingdom, and it focuses on innovation, productivity, creativity and the various IS-8 sectors those sectors that probably stand more chance of gaining investment and powering the UK to a future which is innovative, sustainable and achieves growth targets.

Tony Hines: 13:24

The UK government's Modern Industrial Strategy 2025, published on the 23rd of June, has been broadly welcomed as a long-overdue reset in industrial policy, though not without caveats. Here are some key highlights and reactions to the strategy. Here are some key highlights and reactions to the strategy Strategic clarity and long-term vision. The 10-year plan aims to boost business investment and growth across eight high industrial potential sectors, including advanced manufacturing, clean energy, digital tech and life sciences. It's been praised for offering the kind of policy stability that industry leaders have long called for.

Tony Hines: 14:00

Logistics and supply chain focus. While logistics wasn't granted foundational sector status, the strategy acknowledges its systemic importance. It introduces a £600 million strategic stress accelerator, strategic sites accelerator and a new supplyly Chain Centre to coordinate investment and resilience efforts. Logistics UK welcomed the recognition, but expressed disappointment over the lack of foundational designation. I, too, think this needed to be more central in the strategy. I think this is a weakness of the strategy, if anything. I think this is a weakness of the strategy, if anything, because supply chains are now at the centre of everything we do and it needs more grid access, calling it a critical step for competitiveness, tech and innovation investment. The strategy pledges billions for frontier technologies, 670 million for quantum computing, 2 billion for AI and 370 million for telecoms and connectivity.

Tony Hines: 15:16

Industry voices have called this a game changer, though some remain cautious about delivery, skills and apprenticeships. While the strategy promotes skills development, some professional bodies like REBA criticise the defunding of Level 7 apprenticeships for over-21s as a backward step, and I think that's possibly a criticism that I would levy. At the skills and apprenticeship side of this, there need to be opportunities for business to skill up after the age of 21. I myself am a product of a success story after the age of 21. I won't go into detail, but I'll just let you know that it was very important to me. Business Sentiment, a coalition of business groups including the CBI and British Chambers of Commerce, described the strategy as a valuable opportunity to rebuild confidence and investment momentum. In short, the verdict is cautiously optimistic. The strategy is seen as ambitious, overdue and potentially transformative. If implementation lives up to the promise, then we're in for good years ahead. So, all in all, generally favourable responses. Cautiously optimistic, I think, is the word we might use.

Tony Hines: 16:35

The new era challenges, of course, that the government talked about in their document for the new modern industrial strategy. They talk about a more volatile world, new threats to security and living standards, unpredictable global trading environments, fragile global supply chains, assertive economic competitors and the cost of living crisis. Now, those aren't unique challenges to the United Kingdom. They're challenges to many economies around the globe, but it's how you tackle them, internalize those issues and have strategies and policies to deal with them, and the government has certainly thought through many of these problems and come up with some generally good thinking about ways in which to tackle them. Whether they've put enough resource into it will only be seen later. And, of course, they're hoping to go beyond public money by attracting investors who see their own opportunities through investing in the United Kingdom, and that will be a good incentive for many.

Tony Hines: 17:47

The one thing that the United Kingdom offers is some stability, and stability is important when you come to invest. They also talk about new era opportunities in some depth, and we've talked about some of those. They've talked about technological advances in life sciences and AI, productivity and way of life advances, and they say that the UK is well positioned as an open, entrepreneurial, global trading champion. World-leading finance, universities and scientific institutions are at the heart of this, restoring international standing and, of course, political stability, which is always important. Spur domestic businesses to scale up to support small and medium-sized enterprises via resilient supply chains. Increase national productivity. Strengthen economic security and resilience and support environmental goals and net zero transition.

Tony Hines: 18:52

Now, when it comes to that one on smes and resilient supply chains, that's important, but it's not just about resilient supply chains. It's agile supply chains and it's having support for all that documentation they talked about through the digital interfaces and the digital technology being accessible to small and medium-sized enterprises as well as to the larger businesses, and that will create efficiency and it's getting rid of that bureaucratic red tape, all the things that cause friction in supply chains. That's what small businesses need, that's what medium-sized enterprises need. In fact, all businesses need it, but the SMEs more than perhaps other groups. Well, that's it for this special on the UK Modern Industrial Strategy 2025. I hope you've enjoyed the episode, I hope you've learned something from listening and I hope it inspires you to think about the opportunities that might be presented by the UK Modern Industrial Strategy. My overarching thought at the end of this is implementation is always the key when it comes to strategy, but at least there's a plan, and we haven't had that for some time. So the plan has to be a positive.

Tony Hines: 20:11

If you like Chain Reaction, don't forget to subscribe. There are over 300 episodes and this one has been a special on the UK economy. I'm Tony Hines, I'm signing off and I'll see you next time in Chain Reaction. Bye, for now, you've been listening to the chain reaction podcast, written, presented and produced by Tony Hines.