Could the government’s industrial strategy be the key to unlocking UK productivity?

It is in neither the private nor public sector’s interest that this productivity drag continues. The Industrial Strategy recognises the magnitude of the challenge and will create a decade-long growth plan focused on sustainability, resilience, and regional distribution. By setting out plans for the eight priority sectors, as previewed in the green paper, the strategy provides a direction for growth. But to rally the private sector, the government now needs to reorientate its funding and investment mechanisms if its chosen sectors are to realise the opportunity ahead.

A new lens on sectors

It sounds simple, but the complex web of commercial and individual interests can be difficult to mobilise. It’s far more nuanced than the state working with the private sector, and much deeper than talk of partnerships. Rather, the government needs a healthy risk appetite and to be intentional about who to back and how – concentrating support where it has the strongest chances of success. This is key to unlocking business transformation, growth, and productivity.

In practice, the Industrial Strategy’s eight priority sectors should now be reflected in the innovation agencies and bodies that the government uses to engage the private sector. We know from our recent research that well over 80% of businesses seek outside help when looking to innovate. The government innovation agency, UK Research and Innovation (UKRI), is often a first port of call. Yet many business leaders I speak to struggle to access and engage with UKRI. Businesses often want advice and insights that are tailored to their industry, whereas UKRI has been set up around a combination of technologies (such as semi-conductors) and domains (such as Research England) that are deliberately sector-agnostic.

With the Industrial Strategy now in play, UKRI could instead be redesigned around the eight sectors identified as having potential for high growth. The government’s AI Opportunities Action Plan provides additional impetus for such a reorganisation. Research by Public First found that up to a third of the time spent on daily tasks in the public sector could be augmented by GenAI tools. UKRI, along with the rest of the public and private sector, can take the opportunity to shift roles from more administrative tasks and refocus on value-adding activities aligned with client industries. Likewise, the Department for Business and Trade could provide a broader set of growth services to help businesses expand and export. This would transform it from an information service to one that also provides tools, resources, and support tailored to the priority sectors.

High-growth frontiers

The good news is that there are some proven UK examples that the government can draw on to provide clear, long-term plans to back sector-aligned innovation efforts. Take offshore wind, which was originally identified as an opportunity by MPs in the 1980s. Sustained policy support via innovative revenue models like the Contracts for Difference – which provide revenue stability for suppliers – and public private R&D partnerships have delivered a tenfold increase in installed capacity since 2010, while reducing costs by more than 60%. Offshore wind has had a few bumps on the way but is one of the great UK success stories, with around £6bn in annual turnover and the largest windfarm in the world. There was a long-term plan, which offered 15-year price guarantees, allowing businesses to invest with confidence and reduce costs over time.

Calculated and strategic gambles like these are ultimately needed to create globally competitive, productive ecosystems. Life sciences are a case in point. The East London Life Sciences Super Cluster – a collaboration between industry, the NHS, and academia – has an estimated annual economic impact of over £2bn. A strong and intentional ‘big bet’ from the government on targeted sectors can have a positive halo effect across the economy. A thriving health and life sciences sector not only improves patient care and reduces the burden on the NHS, but brings significant economic benefits.

The government’s Industrial Strategy offers fresh hope to shift the dial on productivity and economic growth. To put the potential impact into perspective, achieving US levels of productivity – hard as it may be – could enable us to more than double funding to the NHS. The building blocks are in place, but the government must now focus on galvanising businesses through strategic, sector-aligned interventions. None of this will be easy, but it is within reach under the new Industrial Strategy, which could finally unlock the productivity puzzle.

This article was first published in Management Today.