UK Industrial Strategy: key components and high-growth industries

We believe the government needs to improve access to international markets and secure supply chains by negotiating increased and improved trade deals. The second area of focus should be making regulatory compliance less onerous. This could include simplifying regulatory processes, enhanced guidance and implementing digital platforms for compliance. There should be a distinct approach for new or emerging technologies with a lighter regulatory framework and better use of “sandboxes” for testing new technologies.

The renewable energy sector would benefit greatly from greater stability and long-term planning. The current uncertainty around investment priorities, long-term goals and energy mix undermines the potential for growth. The government needs to make clear its long-term commitment to growing the renewable sector through pricing, addressing fossil fuel subsidies, subsidising and supporting the adoption of renewable energy by consumers and small businesses. It must also make the investments in the National Grid that will enable the renewable energy sector to contribute.

We believe that some specific funding and regulatory reforms will foster growth and innovation in the life sciences sector and help maintain its position as a global leader. We would like to see fast-track approval pathways for innovative treatments and technologies as well as a streamline approval process with the MHRA. Big data and AI have huge potential in healthcare but the regulations governing patient data and privacy mean that collaboration and data sharing are difficult. We would also like to see greater investment in Institutes like Catapults and in specialist manufacturing facilities. Finally, expanding investment schemes would encourage private investment and we believe this should be accompanied by more funding incentives for academics and investors.

We, like our business we support in financial services, are working with the government and regulators to find the right level and framework for regulation. We would like to see regulation that is simplified and clear and that strikes the right balance between protecting consumers and encouraging innovation and growth. Ensuring that UK regulations are aligned with international standards and regulations will be key to creating opportunities for UK financial services businesses. There are also opportunities to simplify the framework of regulatory bodies in financial services. From our work helping clients comply with regulations, we understand the time and resources that compliance demands and we believe this burden can be reduced while still protecting consumers.

The UK professional services sector, especially the legal sector, has a global reputation and influence that benefits the UK economy. We believe the government should update the legal frameworks to accommodate and encourage innovative technologies and business models. There should also be subsidies and incentives to encourage the burgeoning UK legaltech sector. Another area where reform would be beneficial is data protection regulation, which could be made clearer while still protecting individuals.

We believe there are five areas of digital technology that the UK government should foster as they will give the UK economy a boost in terms of competitivity and growth. These are Artificial Intelligence and Machine Learning, Cybersecurity, Healthtech, Quantum Computing and Telecommunications Infrastructure, especially 5G.

Our suggestions for how the government could support emerging technologies include streamlining the process for obtaining patents and IP rights to reduce time and costs, expanding and simplifying R&D tax credits for small and medium-sized enterprises and those investing in emerging technologies, and simplifying planning and approval processes for digital infrastructure such as 5G networks.

To boost productivity in key sectors, the UK must accelerate innovation and ensure data is managed safely and ethically. Successful initiatives like the Made Smarter programme and Innovate UK Catapult network support research, development and innovation.

The Chancellor announced several investments in the Autumn Budget including:

• £2bn investment for health R&D to drive innovation and support the UK life sciences sector
• £520m for the new Life Sciences Manufacturing Fund (£70m in 2025/26 initially)

Our position is that the absence of a stable tax, regulatory and economic environment creates uncertainty for boards and increases the risks of business investment. A recent example is the changes to R&D reliefs and HMRC enforcement which has led many organisations to stop carrying out R&D through UK entities. We also suspect that the R&D contracting out rules may still be too complex for many mid-market businesses and it may take a long time before many are comfortable enough to enact them. We recommend a R&D Advance clearance process for claims that is practical, flexible and fast, helping to bring more certainty for businesses.

We welcome the government’s business tax roadmap confirming there will be no further changes to R&D relief rates, patent box rates, corporation tax rates and capital allowances for this parliament.

To support increasing commercialisation of R&D, we would advocate the expansion of the scope of patent box relief to include design rights. We believe that recruitment incentives to encourage companies to employ scientists and engineers, including an exemption from employers’ NIC for the first 3 years of employment, would bring substantial benefits. This could be limited to specific ‘research zones’.

The most significant barriers to investment in the UK from a people and HR perspective include skills shortages, talent retention issues, and insufficient personal development infrastructure. The CBI reports that 75% of businesses face skills shortages so it is an important policy area the government needs to address. New efforts, including the new Skills England brings together central and local government, businesses, training providers, and unions to tackle these challenges.

We believe the government can help by creating greater access to data, expertise and strategic research that many businesses cannot afford on their own. Other policy solutions could government funding for enhanced training programmes or learning platforms hosting third-party content and tax incentives or grants to mid-market businesses that invest in employee training.

In our most recent survey of mid-sized businesses, 19% of respondents said that a government policy aimed at forging long-term partnership between the education system, local government and businesses to connect young people with local employment or training was the top policy they would like to see in the next 6-9 months. This would encourage business investment in training.

Infrastructure is crucial for economic growth, connecting people, goods, services, energy, and ideas. The UK government aims to improve planning, transport, and digital connectivity to support growth-driving sectors and address regional constraints. Key initiatives include updating National Policy Statements, introducing the Planning and Infrastructure Bill, and developing a 10-year infrastructure strategy. Energy reforms focus on reducing high electricity costs and accelerating grid connections to support clean energy goals. Great British Energy will invest in clean power generation, providing demand certainty and enabling supply chains to invest. These efforts aim to create a pro-business environment and unlock regional growth potential.

Regulation plays a crucial role in addressing market failures, creating economic certainty, and driving innovation. The government is reviewing current regulations to ensure they support growth-driving sectors and will reform those that are not fit for purpose. For instance, changes to non-financial reporting regulations are underway. New regulatory frameworks will support emerging technologies, with the Regulatory Innovation Office speeding up decisions for innovations like engineering biology and drones.

We have suggested a number of regulatory reforms to encourage growth and innovation. These include;

• Sustainable manufacturing standards covering energy efficiency, waste reduction and the use of renewable resources
• Reduce time and costs for obtaining patents and other IP rights
• Make R&D tax credits more accessible to small and medium-sized enterprises (SMEs)
• A clear and simplified redress programme with clear and limited parameters
• Make it easier for UK firms to operate globally by harmonising EU and wider regulations and reducing barriers to cross-border payments

Businesses still face challenges in accessing growth capital due to risk aversion and regional disparities. Government schemes like VCT and EIS offer tax incentives but come with complex criteria and high competition. Industry-specific barriers also exist, with high-tech and life sciences facing longer development cycles and greater uncertainty. Investors, on the other hand, struggle with assessing risk versus return and securing follow-on funding. Addressing these barriers by expanding the investor pool, facilitating flexible investment models, providing regional support, and improving investor confidence could enable more UK companies to scale up and become global players. This would create a more vibrant and competitive environment, contributing to both the national economy and international markets.

We have put forward some examples from overseas of policies that will improve access to finance for growth.

Patient Capital used in France, the Netherlands and U.S

Patient capital is already achieving positive outcomes in France, the Netherland and the U.S. It provides funding with a long-term investment horizon, usually in high-growth, R&D-intensive industries These ‘patient’ investments tend to have lower immediate returns but aim for significant long-term value creation.

We believe this approach could prove invaluable in life sciences, clean tech and deep tech, for example. These high-growth sectors often require long R&D cycles and fail to generate significant returns in the short term.

The French Tech Sovereign Fund is an example of a patient capital model, offering long-term investment in innovative companies, particularly in AI and digital industries. Similarly, the Dutch Innovation Fund has provided long-term investment to emerging companies in clean energy and digital sectors.

Green Bonds & Sustainability-Linked Loans (SLLs)

Green bonds are fixed-income instruments that fund projects with positive environmental benefits. Sustainability-linked loans offer companies more favourable loan terms in exchange for meeting sustainability targets such as CO2 reduction or renewable energy investments.

Clearly, these forms of finance promote investment in activity that contributes to achieving net-zero targets and encouraging green growth. Equally these instruments can help unlock capital for innovative green technologies, particularly in sectors like renewable energy, electric vehicles and carbon capture. The Green Investment Group in the UK is an example of a public-private partnership designed to channel private capital into green projects.

The industrial strategy aims to unlock the potential of UK cities and regions by attracting investment and creating a thriving business environment. Currently, economic performance is skewed towards London and the South East, while other city regions underperform. For example, Greater Manchester, the West Midlands, and Glasgow have significant untapped potential, with a combined productivity gap of £47 billion per year for the eight largest cities outside London. The strategy will focus on high-potential clusters in sectors like life sciences, financial services, advanced manufacturing, digital industries, and clean energy. Local growth plans, supported by devolved powers and funding, will drive regional growth.

One of the reasons that we advocate for policies and measures that support mid-market businesses is that they are distributed more evenly across the UK’s regions that larger businesses. These mid-market businesses are potentially powerhouses of regional growth and employment.