The UK government today has set out a 10-year plan to significantly boost business investment in eight key sectors, a strategy that includes a new capital commitment from the British Business Bank.
Prime minister Keir Starmer said the modern industrial strategy “marks a turning point for Britain’s economy and a clear break from the short-termism and sticking plasters of the past”.
According to the government, the plan of action includes boosting research and development spending to £22.6bn (€26.4bn) per year by 2029-30 to drive innovation across the “IS-8”, the eight sectors with the highest potential.
It also said the strategy would unlock finance for innovative businesses, especially for SMEs.
Plans were also published for five sectors, including clean energy industries and advanced manufacturing. A plan for financial services is due to be published alongside the chancellor’s Mansion House speech on 15 July.
Karen Northey, director of corporate affairs at the Investment Association, the UK asset management trade body, said the publication of the Modern Industrial Strategy “sets the wheels in motion on an important partnership between business and government to unlock further growth in the UK”.
“A clear plan to back the UK’s high-growth sectors is a welcome signal that Britain is open for business,” she said.
Northey highlighted the pledge to increase the capacity of the British Business Bank as particularly positive, including the additional £4bn earmarked for industrial strategy sectors (see box).
The Pensions and Lifetime Savings Association recently said the government was “taking forward crucial investment in the economy” at a time when pension funds had committed to invest more in productive assets in the UK and hence needed a pipeline of investment opportunities.
Sustainable finance ambitions
With regard to financial services, the government has said it wants the UK to be “the world’s most innovative full-service financial centre” and to build on its work in sustainable finance “to capitalise on increasing demand for sustainable financial products”.
It said the financial services sector plan would be published in July “following an extensive co-design process with industry, and working in close partnership with the regulators and the sector”.
James Alexander, chief executive officer of UKSIF, welcomed the Industrial Strategy’s sustainable finance ambition.
“Investors stand ready to work with the government to deliver on its commitments to consult on climate-based transition plans for businesses and on the UK Sustainability Reporting Standards, based on those issued by the International Sustainability Standards Board,” he said.
“The government is right to take ‘every appropriate opportunity’ to use public funding and to attract private capital, so the country can unlock billions in investment that will drive jobs, growth and long-term prosperity.”
British Business Bank pledges £6.6bn to innovation
British Business Bank has committed £6.6bn (€7.7bn) to boost growth, a decision described as “marking a major step change in financing to support smaller businesses to start and scale in the UK”.
The commitment was announced today by the secretary for the Department for Business and Trade, Jonathan Reynolds, as part of the industrial strategy.
A new £4bn initiative, British Business Bank Industrial Strategy Growth Capital, will be invested through the bank’s capabilities in eight growth-driving sectors – advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services.
The bank said this scheme would crowd in around £12bn of private capital.
As part of the Spending Review settlement, the British Business Bank will also be committing £2.6bn of capital to support entrepreneurs wherever and whoever they are to access capital, driving the growth of smaller businesses across the UK, including high-growth innovation clusters across the country.
The recent Spending Review announced an increase in British Business Bank’s total financial capacity to £25.6bn, which the bank said will enable a two-thirds increase in investments to around £2.5bn each year. This investment is expected to crowd in “tens of billions of pounds” of additional private capital and will support the most innovative UK businesses to access the capital they need to start, scale and stay in the UK.
The British Business Bank noted that reforms to its governance and financial arrangements, which will be implemented by the end of this financial year, “will place the Bank in a position to successfully deliver the increased level of investment activity and will mean the Bank has a newly permanent and more flexible capital base, with greater flexibility to reinvest returns over the long term to increase growth and prosperity across the UK”.
Louis Taylor, CEO of the British Business Bank, said: “We welcome today’s announcement by the secretary of state to deliver British Business Bank Industrial Strategy Growth Capital, as well as the reforms to the bank’s governance and financial framework. Using our market expertise and reach, we have a critical role to play in supporting smaller businesses in the eight growth-driving sectors to grow and stay in the UK.”
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