How the Industrial Strategy looks to boost R&D, drive innovation and deliver long-term growth

The recently launched Industrial Strategy is the government’s latest way of setting out its economic priorities.

Like the earlier Corporate Tax Roadmap, the strategy hopes to give the business community certainty while helping to lay the groundwork for growth and investment. In its own words: “It is robust, strategic, and unashamedly long-term: a 10-year plan to make the UK the best country to invest in anywhere in the world.”

As such, there are no surprises, with reiterations of commitments to:

New guidance on R&D tax reliefs to benefit the creative industry

One upcoming change of interest, however, is referred to within the Creative Industry: Sector Plan, where plans are revealed for later in 2025 when HMRC will be updating its guidance on R&D tax reliefs to help benefit the creative industry.

The new guidance seeks to clarify that creative sector projects can qualify for R&D tax relief as long as their arts activities directly resolve scientific or technological uncertainties. Currently there is a separate Creative Industries Tax Relief scheme, which does not focus on innovation within the industry.

Supporting growth-driving frontier industries

The strategy rightly asserts that the key to unlocking economic growth is driving innovation. To do this, the government plans to invest £86 billion into UK R&D targeting eight growth-driving sectors, which they have dubbed the “IS-8” (Industrial Strategy 8). These IS-8 currently represent 32% of the UK’s economy.

Within each of these growth-driving sectors, the strategy has also identified subgroups known as “frontier industries” that are at the leading edge of their sectors and are therefore most likely to see breakthroughs that can be commercialised, drive growth in a way that’s both sustainable and clean, and attract private investment. More importantly, they are seen as the most likely sectors and industries to create jobs, strengthen communities, and contribute to a stronger and more resilient UK economy.

The Industrial Strategy’s growth-driving sectors and their frontier industries include:

Focusing UK R&D on long-term economic growth

The strategy commits to increasing public sector funding in R&D, with public investment targeted at the IS-8 reaching £20.4 billion in 2025/26 and then growing to £22.6 billion by 2029/30.

This funding will come in the form of ten-year budgets (now longer to better reflect realistic R&D life cycles). The first recipients of the ten-year budgets will be the Aerospace Technology Institute, the DRIVE35 programme for automotive, the National Quantum Computing Centre, and the Laboratory of Molecular Biology.

The government will look to incentivise collaboration between industry and academia by expanding the AI Research Resource (a cluster of supercomputers) by at least twenty times by 2030 along with the launch of a new R&D Missions Accelerator Programme with £500 million of funding behind it.

UK Research and Innovation (UKRI) will also align its programs and budgets with the IS-8 priorities, focusing on innovation, commercialisation, and scale up across the UK.

Targeting regional support to boost innovation within the IS-8 sectors

The government says it will be targeting regions in the UK that support the IS-8 sectors to “increase national productivity, strengthen our economic security and resilience, and support our environmental goals and the net zero transition.”

As part of this, there will also be £500 million available for the Local Innovation Partnerships Fund to support high-potential innovation clusters across the UK, aiming to attract £1 billion in private investment and £700 million in economic value for local economies.

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