Following last year’s General Election, the Labour Party has now enjoyed 12 months in power, which was rubber-stamped by the release of the UK’s Modern Industrial Strategy.
UK manufacturers have long since been calling for a more detailed industrial strategy, one that addresses key issues like rising energy costs, skills shortages and the route to net zero. A lack of long-term, actionable guidance in the past has proved costly, both for UK manufacturers individually and for the sector’s international competitiveness.
The Modern Industrial Strategy, which follows the Invest 2035 agenda released in November of last year, has gone some way to address these concerns. Here, we weigh up how the new policy has met the sector’s calls for change, with support from custom cable assemblies manufacturer, GTK...
Industrial Strategy
One of the key criticisms levelled against the previous government was a lack of centralised guidance for manufacturers, something that Labour have always committed to deliver. The long-awaited industrial strategy, first slated to be released in the spring, was eventually delivered at the end of June, taking aim at a number of key issues facing the manufacturing sector.
However, given that many of these issues, particularly those pertaining to a lack of long-term guidance, long precede the election of the Labour Party, they might be forgiven for taking almost 12 full months to publish a detailed industrial strategy.
“The scope of the industrial strategy is something that our sector has needed for a long time,” says John Morath, Managing Director at GTK. “Taking a longer-term view of the next ten years for manufacturing is fantastic, and something we’re excited to see.”
“The new strategy isn’t perfect – the government’s focus on IS-8 sectors means that some areas require further attention, and certain aspects of policy are very vague at this stage, but there are significant wins in terms of future-proofing the sector. We hope these will help deliver lasting change.”
Rising costs of production
One of the continued issues facing the government is the cost of industrial energy, which has long been a burden for UK manufacturers aiming to stay competitive on the international stage. Our energy prices are four times higher than in the US and 46% higher than the international average, with fluctuating energy costs damaging many manufacturers’ profitability while making it increasingly difficult to carry out accurate cost forecasting in the medium term.
“We’re pleased to see actionable steps put into place to provide a more stable energy supply for UK manufacturers,” comments John. “The introduction of the British Industrial Competitiveness Scheme, which will help reduce electricity costs by up to £40 per megawatt hour from 2027, will be a huge help, but this may come too late for companies that’ve been grappling with energy costs for years.
“It’s also good to see increased support for manufacturers in the most energy-intensive sub-sectors, like steel, chemicals and glass.
“However, manufacturing bodies like Make UK have suggested removing energy levies to incentivise the use of cleaner forms of electricity. The new strategy does not address this in enough depth, so more detailed guidance could be useful here.”
Skills shortage
The shortage of skilled manufacturing workers has long-since been a burden for recruiting manufacturers, with three in five young people unlikely to even consider a career in the sector.
Falling numbers of young people entering vocational apprenticeships, failing school-workplace employment pipelines and upskilling pathways were all identified as key reasons behind the sector’s long-term skills shortage.
“I’m pleased that the new strategy goes a long way to addressing skills concerns that are threatening our sector’s long-term viability,” says John. “It’s great to see pledged investment aimed at all ages, whether it’s a young person taking their first steps on the ladder or experienced employees looking to diversify their skillset.”
The new strategy pledges to deliver sufficient vocational courses to guide an additional 65,000 16 – 19-year-olds into the sector, as well as the Lifelong Learning Entitlement, launching in January 2027, supporting individuals to learn, retrain and upskill throughout their working lives.
Meanwhile, the new Growth and Skills Levy will fund short courses in advanced manufacturing disciplines from April 2026. Larger employers with a wage bill over £3 million will pay into the levy, while manufacturing SMEs below this threshold are not required to pay, but can still access 100% funding for apprenticeships aged 16-21 and 95% funding outside of that age bracket.
Net Zero
A lack of net zero guidance has been another key consideration for UK manufacturers since the 2030 target was first announced. By its nature, manufacturing is a carbon-intensive sector, and was the third-largest contributor to UK greenhouse gas emissions in 2022 – so previous failings to provide sector-specific guidance was a key sticking point for manufacturing companies in the leadup to the election, with nine in 10 UK businesses calling for greater decarbonisation support in a May 2024 study.
‘Promoting industrial decarbonisation’ was front-and-centre of the new strategy, with the government providing strong support for frontier initiatives that have high growth potential (another key trend throughout the strategy). Wind, nuclear fission, fusion energy and carbon capture technology have all been identified as priorities.
John comments: “With cost identified as the number one barrier for businesses pursuing net zero, Labour have done well to democratise finance, making £4bn of additional capital available for the IS-8. More detail is needed in terms of other areas of their environmental programme, however, which should be delivered in the government’s upcoming Carbon Budget Delivery Plan, which is due this Autumn.
“Overall, the outlook for the UK’s industrial sectors is far better than it was 12 months ago,” he concludes. “There are certainly areas of the strategy that require more detail and more attention, so it’s going to be important that the Industrial Strategy Advisory Council (ISAC) takes findings from companies of all sizes on board when executing the strategy.
“It’s great to see a longer-term view being taken of the UK’s industrial sectors, taking a focus on sustainability and growth while delivering actionable steps to protecting our sector, both regionally and on an international stage.”
Photo by Ben Griffiths on Unsplash
