The UK Innovation Report serves as a wake-up call: except for some bright spots, UK industries have been in decline for decades. Across advanced industries such as pharmaceuticals, chemicals, machine equipment and vehicles, the UK’s global market share has dropped by nearly half – from around four to two per cent – in the last 20 years.
The Industrial Strategy green paper rightly identifies the potential of sector plans to support policy development and prioritisation. Set to be released alongside the final Industrial Strategy in spring 2025, sector plans offer a historic opportunity to reverse the decline of UK industries. Based on our work at Cambridge Industrial Innovation Policy (CIIP) we suggest five considerations to ensure that sector plans are effective.
1. Sector plans ought to lead to more nuanced approaches and effective interventions
Why sector plans? The answer is simple: not all industries are created equal. Different sectors have distinct economic conditions, market structures and investment needs. Some are pivotal for national security; some are more reliant on scientific research and others play a bigger role in achieving policy goals such as net zero. As such, sector considerations give key insights into how and where policy interventions can have the greatest impact.
While horizontal policies, such as regulatory frameworks and intellectual property protection, are critical components of the Industrial Strategy, their impacts often vary significantly across sectors. For example, horizontal policies like R&D tax credits tend to significantly benefit sectors such as pharmaceuticals, where companies may allocate over 20% of their revenue to R&D, compared to just five per cent or less in other sectors.
Sector plans are not justifications to intervene more. Well designed sector plans can help design more nuanced interventions based on sector realities and ensure that resources are directed to areas where they can have the greatest impact.
2. A painstaking effort is required to build a new evidence base for sector plans
To be effective, sector plans must go beyond generic answers such as skills, investment or infrastructure. They should provide a comprehensive description of the sector’s structure, identify the drivers of innovation, competitiveness and growth, and anticipate future trends. Additionally, they need to determine what is necessary to enhance the UK’s competitive position and where policy interventions can have the most significant impact.
This evidence is neither readily available from official statistics nor straightforward to collect. For instance, approximately one-third of UK companies fall under ‘other’ categories, obscuring their specific economic contributions. Gathering the required evidence cannot solely rely on desk-based exercises. Value chain analyses, foresight exercises and competitiveness studies are just some of the tools necessary to ensure that sector plans are well-informed and future-oriented. These demand an ongoing process, blending statistical analysis with industry and technology expertise.
International examples highlight the complexity of this task. Before the CHIPS Act in the US, a broad task force drew on input from more than a dozen departments and agencies, and hundreds of stakeholders – along with extensive public comments and analytical research. In Singapore, senior officials have emphasised the ‘painstaking effort’ required to develop sector plans, including reviewing each sector to look at ways to improve productivity, redesign jobs and establish better career pathways for workers.
3. A process should be established for the joint public-private development of the sector plans
Sector plans should be both government- and industry-led, ensuring alignment with broader national objectives and capabilities. The plans should involve bottom-up participation of a broad range of stakeholders to agree on a shared ambition for growth and innovation. This collaborative model ensures that plans are ambitious and grounded in reality.
Industry associations can facilitate collaboration between government and industry. However, the government should balance the interests of dominant players with those of smaller businesses and emerging innovators. The goal is ’embedded autonomy’, a situation in which the government works close with industry and society but still retains its autonomy and is not captured by interest groups.
4. Sector plans should establish concrete innovation, competitiveness and growth targets
Reversing the loss of global market shares of UK industrial sectors should be at the heart of sector plans. Establishing concrete value-added and export growth targets can help communicate and focus efforts. These should be set out comparing the performance of UK sectors with those of international competitors.
The Centre for Sectoral Economic Performance, for example, has facilitated a ten-growth plan for the health tech industry which details how the sector can scale up to add 50,000 high-skilled jobs and double the gross value added of the sector of this period.
Other countries have set clear sector plan goals. For example, China aims to achieve 20% annual growth in its robotics industry by 2025, while Korea plans to increase its bio-economy exports to $50bn by 2030 and become the world’s top producer of panel displays by 2027. Meanwhile, Canada has proposed raising advanced manufacturing exports by 50% by 2030.
5. Learning from international examples strengthens sector initiatives
The UK doesn’t have to reinvent the wheel. Others offer valuable lessons on crafting and implementing effective sector initiatives. Take, for example, Taiwan’s semiconductor industry or Singapore’s biopharma sector. Both success stories demonstrate the transformative power of targeted strategies. These nations have positioned themselves as global leaders by identifying high-value opportunities, aligning public and private efforts, and providing the right support.
The UK can reverse industrial decline by promoting collaboration, establishing clear objectives, and adopting international best practices. The current timeline announced (spring 2025) to produce the sector plans is unrealistic. Rather than rushing to produce them, we should seize this opportunity to take the development of sector plans seriously and view them as a fundamental component of a robust industrial strategy moving forward.
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