Evaluating The Uk’s New Industrial Strategy

EVALUATING THE UK`S NEW INDUSTRIAL STRATEGY (INVEST 2035)

Introduction

This article investigates the recent re-emergence of industrial strategies as a central part of government economic policy making. It takes a deep dive look at the UK’s new industrial strategy, Invest 2035.

Industrial policy (IP) aims to influence the structure of the economy, affecting growth, productivity, investment, and labour markets. Advanced economies have sharply increased their use of industrial policy: IMF data shows the number of IP measures rose from around 100 in 2017 to nearly 1,000 in 2022, driven by the US, EU, and China.

The recent surge is motivated not only by economic objectives but also strategic concerns such as climate transition, supply chain security, and geopolitical competition. IP’s effectiveness remains contested by some economists, but its prominence has grown significantly.

This article proceeds as follows:

1. What is industrial policy

2. Why has industrial policy re emerged

3. The UK’s New Industrial Strategy, Invest 2035

4. Views of Invest & 2035 by UK thinktank, the Institute for Government and the IMF

The annex lists aspects of A Level and IB syllabuses that link to industrial policy. lt;/p>

1. What Is Industrial Policy?

Definitions vary, but most emphasise deliberate government intervention to reshape economic activity. The IMF defines industrial policy as state action to change the structure of the domestic economy, shifting production or investment toward strategically important sectors.

The OECD similarly describes IP as government assistance to boost or reshape specific economic activities, particularly where markets alone will not meet economic, social, or environmental objectives.

Key Features

Targeted intervention: Governments select particular sectors, technologies, or firm types for support. Policies may focus on large firms with scale potential or smaller firms offering innovation and market disruption.

Addressing economic, social, and environmental challenges: IP is used to raise productivity, create high quality jobs across regions, strengthen economic security, and accelerate the transition to net zero.

Correcting market failures: Tools include subsidies, tax incentives, quotas, regulation, and public investment, intended to shift market outcomes toward socially desirable objectives.

2. Why Has Industrial Policy Made a Comeback?

Although widely used after the Second World War, IP declined from the 1980s onward as governments moved toward market led economic management.

From the early 2020s, several factors triggered a revival:

a) Economic stagnation: Persistently low productivity growth and concerns over living standards created pressure for more active state intervention.

b) Geopolitical and supply chain pressures: COVID 19, the 2008 crisis, and Russia’s invasion of Ukraine highlighted vulnerabilities in energy, technology, and manufacturing supply chains

c) Climate transition: Large scale investment needs and coordination challenges made market only approaches insufficient.

d) Shift in global economic thinking: there has been a partial shift away from free market policies in many countries.

The US Inflation Reduction Act signalled the return of government-led industrial strategy into the mainstream of economic policy making. By the mid 2020s, industrial strategies had been adopted or revived across Europe and many emerging economies. The UK followed with its New Industrial Strategy in 2025.

3. The UK’s New Industrial Strategy (Invest 2035)

Published in June 2025, the UK’s new strategy aims to boost productivity, support the net-zero transition, improve economic security, and promote regional growth. It focuses on sub-sectors from eight economic sectors representing 32% of UK GDP:

- Advanced Manufacturing
- Clean Energy Industries
- Creative Industries
- Defence
- Digital Technologies
- Financial Services
- Life Sciences
- Professional Business Services

The UK government applied six strategic selection criteria:

1. High Growth and Productivity Potential – Sectors with strong scale up capacity and historic contributions to national productivity.

2. Economic Security and Resilience – Strengthening critical supply chains and maintaining strategic industrial capabilities. lt;/p>

3. Net Zero Alignment – Areas central to decarbonisation and the Environmental Act targets.

4. Regional Growth Impact – Sectors that support place based growth beyond London. lt;/p>

5. UK Comparative Advantage – Building on existing strengths while investing in emerging technologies. lt;/p>

6. Policy Interconnectedness – Importance of enabling technologies and spillover benefits across the wider economy.

4. Independent Evaluations of Invest 2035

Institute for Government (IfG) Assessment

The IfG has historically criticised UK industrial strategies for unclear priorities and political intervention that “picks winners”. IfG’s verdict on Invest 2035:

- Stronger and more coherent than previous UK attempts.

- Built on genuine cross government collaboration, especially between the Treasury and Business Department.

- Provides clearer strategic thinking and fewer ad hoc interventions.

- Requires deeper engagement with business to refine priorities over time.

IMF Assessment

The IMF traditionally advocates cautious use of selective industrial policies, warning of high costs and limited long term productivity effects. It stresses:

- The need for clear market failures,

- Rigorous cost benefit analysis,

- Transparent objectives, and

- Time limited interventions to avoid policy entrenchment. lt;/p>

IMF findings on UK Invest 2035:

IP is most effective where large spillovers, coordination failures, or scale externalities exist.

- Among the UK’s eight sectors, advanced manufacturing is the strongest candidate due to distortions and high spillover potential.

- Clean energy and digital technology offer significant innovation and coordination benefits.

- Financial Services, Professional Business Services, and Creative Industries show weaker justification due to smaller underlying market failures.

Conclusion

Industrial policy has returned as a major economic tool due to climate objectives, supply chain vulnerabilities, slowing productivity, and shifting geopolitical dynamics. The UK’s Invest 2035 strategy seeks to address these challenges through targeted support for high potential sectors.

Independent assessments suggest:

- The IfG sees Invest 2035 as a more disciplined, strategic approach than previous UK efforts, though further refinement is required.

- The IMF recognises the potential benefits, especially in advanced manufacturing and clean technology, while warning that selective IP must be tightly designed, rigorously evaluated, and withdrawn when ineffective.

Ultimately, the success of Invest 2035 will depend on implementation discipline, avoidance of politically driven interventions, and consistent monitoring against measurable outcomes.

References

Institute for Government (2025)

Assessing the UK’s Industrial Strategy: Commentary on Invest 2035. Institute for Government, London.

International Monetary Fund (2025)

United Kingdom: 2025 Article IV Consultation – Industrial Strategy Assessment. IMF Country Report, International Monetary Fund, Washington, DC.

OECD (2023)

Industrial Policy – Definition and Framework. Organisation for Economic Co operation and Development.

UK Government (2025)

Invest 2035: The UK’s New Industrial Strategy. HM Government, London.

ANNEX: Key syllabus areas linked to industrial policy include:

EdExcel

- Market Structures Competition (monopoly, oligopoly, contestable markets)
- Government Intervention (market failure, regulation, privatisation, nationalisation)
- Productivity Growth (supply side policies, infrastructure, human capital)
- Globalisation Trade (protectionism, liberalisation, FDI)
- Labour Markets (wage controls, training, regulation)
- Role of the State Regional Policy (industrial strategy, addressing disparities) lt;/p>

AQA A Level Economics

Industrial policy is reflected in:

- Market Structures Competition (monopoly, oligopoly, contestability)
- Government Intervention (competition policy, regulation, nationalisation)
- Supply Side Policies (education, productivity, infrastructure)
- Globalisation Trade (tariffs, quotas, subsidies, FDI)
- Labour Markets Regional Policy (skills, regulation, regional disparities)

IB Economics (SL/HL)

Industrial policy appears through:

- Market Failure Government Intervention (public goods, externalities)
- Market Power Competition Policy
- Economic Development Industrialisation
- International Trade Protectionism (tariffs, subsidies, quotas, FDI)
- Labour Markets Equity Policies (wage setting, skills, regional inequality)