market entry strategies uk essay

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Suppose you are Gucci's general manager and think expanding into the African markets will help Gucci's profits skyrocket. What are some of the things that you should consider before entering a new market? Which type of market entry strategy are most effective? How do firms decide which market entry strategy to use? Entering a new market can be intimidating, but with the right strategy in place, it can also be incredibly rewarding. Whether expanding your business internationally or targeting a new customer base, having a solid market entry strategy can make all the difference. This article has everything you need to know from understanding the different types of international market entry strategies to exploring examples!

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_______ occurs when a company sells its products directly in a new foreign market.

__________ are local firms that are purchased entirely by the entering firm.

___________ can extend the level of profitability by allowing the firm to benefit from access to other economies of scale, labor pools, and consumers who find the product new and exciting.

Which of the following is not a reason why firms enter a new market?

Which of the following is not an example of a market entry strategy?

______ involves moving manufacturing to countries with lower operating costs. 

A company grants another company the right to utilize its product or service under the terms of a _______ agreement, which is a very complex kind of business transaction

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What is Market Entry Strategy?

Market entry strategy refers to a plan that a company creates to enter a new market. This plan outlines the steps the company will take to introduce its products or services into the new market and how it will compete with other companies already operating in that market. The strategy may include researching the new market, identifying potential customers, and deciding the best way to reach them.

Market entry strategy is a comprehensive plan that outlines the steps a company will take to introduce its products or services into a new market while considering factors such as competition, target customers, market trends, and regulatory requirements.

A technology company based in the United States wants to enter the market in China. To do so, it conducts market research to identify the demand for its product , the competition it will face, and the cultural differences that may impact its business. Based on the research, the company develops a market entry strategy that includes partnering with local technology companies to gain access to distribution networks and local expertise, developing a localized version of its product to cater to Chinese consumers, and investing in marketing and advertising campaigns to promote the product in China. The company also ensures compliance with Chinese regulatory requirements to avoid any legal hurdles.

This may involve building factories and stores, partnering with retailers (stores that sell goods produced by others), partnering with an existing local firm that produces a complementary good or service, selling mostly online through a website popular in the new market, or offering franchises to businesspersons in the new market.

Reasons for entering a new market

Three main reasons a business might consider entering a new market include increasing the customer base, no growth opportunities in the market they are currently in, and diversifying risk.

Increasing the customer base. With a careful and detailed plan on the new market a business wants to expand to, companies could see their customer base grow, especially if they develop in a market with the right product-market fit. This could help them see their revenues grow.

No growth opportunities in the market they are currently in . After some periods, businesses may find it hard to grow in the market they are currently in; therefore, it would be more beneficial to look and expand into a new market where they could see new opportunities which would allow them to grow.

Diversify risk. If businesses focus only on industry and they don't expand their portfolio, the risk is too high. There are periods when specific industries perform better or worse than others. Offering products or services in just a single sector would have concentrated risk.

International Market Entry Strategy

International market entry strategies can be complex and risky. Firms must research market conditions in these new markets to see if enough consumers would likely purchase the goods or services.

Firms must also be aware of local laws and regulations, labour policies, and consumer trends. Just because a good or service is very popular in the United States does not mean it will be as popular in other nations.

The costs of expanding into the international market can be very high. Firms that wish to build their factories and stores in new countries must invest significant resources to ensure things go smoothly. This involves lots of legal costs to hire legal teams and ensure that all local, regional, and national laws about the new market are being followed.

To help reduce some of this risk, firms often enter international markets through joint ventures and wholly-owned subsidiaries to ensure that they have time to learn and adapt to the new market.

The entering firm can then begin changing the local firm on a timeline, and to the extent it wishes. Some entering firms may want the profits of the WOS and not attempt to change its branding. Others may change the branding over time to see how local consumers react.

Suppose firms want to enter a new market but cannot afford to purchase local firms outright. In that case, they can buy most of the stock (only possible if the firm is a corporation) and become a parent company .

Types of market entry strategies

Here are the five most common international market entry strategies:

Direct exporting involves selling products or services to a foreign market from the home country. For example, a clothing manufacturer in the United States may export its products to retailers in Europe.

This involves allowing a foreign company to use the company's intellectual property, such as trademarks or patents, in exchange for royalties or fees. For example, a software company in Japan may license its technology to a company in Brazil to sell to its customers.

Franchising

This involves allowing a foreign company to use the company's brand, products, and processes in exchange for fees and royalties. For example, a fast-food chain in the United States may franchise its brand to a company in India to open and operate restaurants.

This involves partnering with a local company in a foreign market to share the risks and rewards of the business. For example, an automotive company in Germany may form a joint venture with a local company in China to produce and sell cars in the Chinese market.

Wholly-owned subsidiary (WOS)

This involves establishing a new business entity in a foreign market that is entirely owned and controlled by the company. For example, a pharmaceutical company in the United Kingdom may establish a wholly-owned subsidiary in India to manufacture and sell its products.

Each market entry strategy has its advantages and disadvantages, and the choice of strategy depends on the company's resources, capabilities, and objectives, as well as the characteristics of the foreign market.

Market Entry Strategy Examples

There are several market strategy examples.

Firms that produce physical goods that can be transported have an advantage in reaching new markets through existing technologies like online sales and modern shipping. However, shipping individual units directly to consumers may become too expensive.

A common market entry strategy is to partner with a local retailer to reduce per-unit shipping costs and reach consumers who prefer shopping in stores. The firm can bulk ship to these retailers in the new market, reducing the per-unit shipping cost. However, this must be planned and negotiated, as retailers charge producers a fee or percentage of profit for putting the products in their stores.

Firms that operate as local producers, meaning they manufacture products at their location, need to physically open new locations in new markets. While this can be done in the traditional method, where the firm buys a property and funds all the startup costs, it is expensive. To more rapidly enter a new market and avoid some startup costs, firms can sell franchise rights to local businesspersons.

This allows an individual or firm to make and sell a standardized product under an existing brand. Typically, the franchisee must follow rigorous rules and guidelines established by the franchisor and pay the franchisor a per cent of the profits. Franchises are commonly seen in the fast food industry. They are only successful once a brand has achieved significant widespread popularity.

Sometimes, manufacturing firms can rapidly enter new markets through licensing agreements. Like franchising, a licensing agreement gives an existing firm the blueprints, equipment, and legal right to make and sell a specific, branded product. The licensee must pay a fee or per cent of the profit to the licensor.

This arrangement allows the branded product to be sold in the new market without the original firm paying costs related to shipping and paying retailers. These costs are taken on by the licensee, who may have pre-existing deals with local retailers that allow the products to reach consumers more quickly.

Global Market Entry Strategy

A global market entry strategy is more complex because it can simultaneously involve manufacturing and selling in many different nations. Global market entry requires lots of coordination among multiple firms and brands.

To expand globally, a multinational firm must seek out opportunities to work with smaller firms in new nations. Efforts must also be made to appeal to new consumers. This can involve sponsorships in addition to traditional advertising, where multinational firms sponsor local sports teams and events to generate brand awareness and public goodwill.

Being a global business can involve manufacturing but not focusing on selling goods in specific countries. This is known as outsourcing and involves moving manufacturing to countries with lower operating costs.

For example, many multinational firms in the United States manufacture goods in Mexico and/or southeast Asia to enjoy lower labour costs, more lenient environmental policies, and relaxed government regulations and taxes. However, this can be controversial and harm a brand’s public image.

Market Entry Strategy Framework

Market entry framework refers to a set of guidelines or steps that a company follows to evaluate and select a market entry strategy. This framework helps the company to analyze the attractiveness of the foreign market, assess its own resources and capabilities, and identify the best market entry strategy to achieve its objectives. The framework typically includes factors such as market size, competition, regulatory environment, cultural differences, and risk and reward considerations.

Market entry framework is a systematic approach that a company follows to evaluate and select a market entry strategy for a foreign market. It involves analyzing the market, assessing the company's resources and capabilities, and considering various factors such as competition, culture, and regulation to identify the most suitable market entry strategy.

The framework is a top-down look at conditions and scenarios, going from general to more specific, to determine whether expanding into a new market is the best growth plan. It can be compared with other options, like introducing new products.

First, firms exploring market entry must look at their existing market share. Is there room for growth in the current market? If there is sufficient room for growth, expanding in the current market may be more cost-effective.

The next step involves comparing competitors. How much competition exists in the current market versus the potential new market? Sometimes, firms choose to move to new markets quickly because the local market already has intense competition while adjacent markets have little competition.

Second, firms need to look at consumer habits in the potential market. This involves market research. Firms may conduct polling and hire market research companies to determine whether consumers will likely buy their goods and services in the new market.

Today, firms can use social media to find out whether customers in new markets are expressing a desire for their products.

For example, people may be expressing a desire to have a specific restaurant come to their town after eating at one in a different city.

Market Entry Strategy - Key takeaways

• Market entry strategy is the planned expansion into a new market, typically meaning a city, state or province, nation, or even continent.
• R easons a business might consider entering a new market include increasing the customer base, no growth opportunities in the market they are currently in, and diversifying risk.
• A market entry strategy framework is a tool used to assess whether or not a firm should expand into a new market.
• Market entry strategies include direct exporting , licensing, franchising, joint venture , and wholly-owned subsidiary (WOS).

Flashcards in Market Entry Strategy 7

Direct exporting

wholly-owned subsidiaries

Entering a new market

Lower revenues

Increasing the volume of production.

Outsourcing 

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Frequently Asked Questions about Market Entry Strategy

What are the entry strategies for the international market?

The five strategies to enter the international market are: direct exporting, licensing, franchising, joint venture, and wholly-owned subsidiary (WOS).

What is the best market entry strategy?

There is no single best market entry strategy that works for all companies and situations. The most suitable market entry strategy depends on various factors such as the company's goals, resources, capabilities, risk tolerance, and the characteristics of the foreign market. Some companies may prefer to start with a low-risk strategy such as exporting or licensing, while others may prefer to invest in wholly-owned subsidiaries or joint ventures to gain more control over their operations and achieve higher returns.

Which framework is used to determine the market entry strategy? 

There are several frameworks that companies can use to determine the best market entry strategy, including: Ansoff Matrix, Porter's Five Forces, PESTLE Analysis

What to consider when entering a new market?

When entering a new market, companies should consider several factors, including the target market's size, growth potential, competition, cultural and regulatory differences, local business practices, distribution channels, and the company's resources and capabilities. It is essential to conduct thorough research, develop a solid market entry strategy, and be flexible and adaptable to the market's changing conditions.

What are joint ventures as a market entry strategy?

Joint venture is a market entry strategy in which two or more companies form a new entity to share resources, risks, and rewards in a foreign market. Joint ventures allow companies to access local knowledge, expertise, and distribution channels, while sharing the costs and risks of entering a new market. It is a popular strategy for companies that want to enter a new market but lack the resources, knowledge, or expertise to do so independently.

What is licensing market entry strategy?

Licensing is a market entry strategy in which a company allows a foreign company to use its intellectual property (such as patents, trademarks, or copyrights) in exchange for a fee or royalty.

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International Market Entry Strategies Essay

Introduction, research question, literature review, methodology, ibm case study, conclusions, research limitations.

Marketing strategies devised by multinational companies in a bid to invest in other countries beyond their national borders is referred to as international marketing. Quite often, this form of marketing borrows a lot from investment principles used in the domestic market.

In a stricter sense though, international marketing encompasses all the entrepreneurial activities that have been tailored down by an individual business organisation as part of planning, promoting, setting price margins as well as coordinating both the inflow and outflow of products and services being offered to the targeted foreign market.

Hence, the complexity that is usually prevalent in international marketing is as a result of cross-border trading that invited myriad of barriers and challenges. Expanding from local to international marketing may take any of the three entry strategies namely direct investment, exporting or joint ventures.

A critical analysis of these entry strategies has been elaborated in addition to correlating these marketing principles in the global business operations of International Business Machines (IBM) case study.

While these entry strategies are varied, it is found that firms wishing to seek foreign marketing of their products often have to make difficult decisions regarding the best strategies to adopt in order to minimize risks and optimize returns.

Marketing practices at the firm level in the domestic market is usually expanded and extended in order to accommodate the surging demands of foreign marketing.

For instance, a firm contemplating an entry into international marketing ought to first of all, identify the market and how the very market will be reached out, select the mode of engagement that will be most profitable, in addition to comprehending the right marketing mix (Roberts, 2005). When such preliminaries are executed well, it will form a viable ground for effective competition in international markets.

This paper explores entry strategies that can be adopted by firms gaining access to international marketing. These strategies have also been discussed as modes of engagement in cross-border marketing by business organizations wishing to expand their operations and thus profitability.

Besides, the case study of International Business Machines (IBM) has also been incorporated in the report in order to draw parallels on how international marketing has been executed in this multinational corporation.

This paper seeks to answer the following research question:

What are the entry strategies for business organizations seeking to engage in international marketing?

Direct Investment

Direct investment, sometimes known as Foreign Direct Investment (FDI) is a popular investment option adopted by firms in the contemporary business environment. This form of investment stream occurs when a firm decides to assume partial ownership of either a company stock or physical assets in an international market.

Besides, this business manoeuvre enables a firm undertaking FDI to gain a significant measure of controlling its management systems and structures. Although portfolio management and FDI are close and interrelated terms, they are quite distinct in the sense that the former does not permit any tangible degree of securing the control of a firm.

On an international scale, the inflow in FDI is often considered to start from ten percent of ownership of stocks or assets of a foreign company. In order to accomplish FDI projects, special arrangements such as mergers and acquisitions have to be effected. Alternatively, international franchising can also be used as a channel of attaining the FDI goals.

Contrary to the common perception, direct investment by firms may not only flourish in economies that are in transition, but also in those economies that are emerging, better known as the emerging markets.

For this reason, the percentage growth of firms wishing to invest in other countries has steadily grown due to such factors like highly skilled and low cost labour resources, wider marketing base compared to the domestic economy, readily available natural resources, stable political environment as well as geographical advantage.

Empirical based research has conclusively established that the desire to seek resources is one of the driving motives why a firm would seek international marketing.

A firm may be prompted to secure its investment abroad since the domestic ground is either too costly or lacks the relevant factors of production. It is vital to note that skilled and unskilled labour or advances in technology may markedly escalate the cost of production at the domestic level therefore leading to low returns.

On the other hand, advances in technology or managerial capabilities may not be accounted for when seeking to invest abroad since such resources can be accessed readily at home albeit at a higher cost.

Hence, assets that are non market in nature are of utmost importance when entering an international market since it is impossible to transfer them through transactions. For instance, a firm may not be in a position to import high skilled and affordable labour whenever it wishes owing to economic and political barriers at hand

On the other side, international marketing that aims at seeking skilled labour may also demonstrate unique characteristics and patterns related to spill over in production. In other words, resource seeking international marketing, in terms of human labour or other natural factors of production such as land have equal implications and meaning to the firm in question.

The bigger picture is to obtain relatively cheap resources that can lower production costs while maximizing returns. Although seeking resources as the basis of international marketing may sound quite familiar with international outsourcing or better still international trade, the two elements are indeed part and parcel of investment portfolio under direct investment.

In a related development though, economists have used the term outsourcing with sparingly diverging meanings. In some instances, it has been used to infer to international partnerships while others have applied it to mean circumstances whereby companies resort to international markets to obtain intermediate inputs

Another common rationale why firms will undertake direct investment is to seek markets for their products. An international market may be more appealing to a firm than the domestic one. For instance, the host country may be supplied with the needed goods and services through direct investment.

In particular, these may be company products that are either not available at the target market or a superior substitutes to the existing products. Besides, the international market can also attract consumers from the adjacent countries, thereby widening the marketing portfolio further

Nonetheless, this form of direct investment is underpinned by one main challenge in the sense that the marketing points being targeted in the foreign country may not be compatible with the location where the investment is to be undertaken.

In any case, both direct and indirect can be used to carry out direct investment. In the first scenario, the host country is used as the ground for exploiting the available market. However, when the host country is used as a platform to seek other markets, it is referred to as indirect market seeking FDI.

This characteristic way of exploiting the host country be seeking other adjacent marketing opportunities can also be classified as export-platform Foreign Direct Investment.

Rationale for direct investment

When seeking international markets as part of direct investment and vice versa, there are two important considerations that entrepreneurial firms have to bear in mind.

Firstly, the prevailing economic and political factor that may affect the process of exporting goods and services from the host country especially in the case of indirect marketing is important. Secondly, the level of appropriateness in the production process is also paramount.

The host country can benefit a lot for a firm engaging in international marketing. For instance, the introduction of new products and services into the new market is deemed beneficial since it will narrow down the gap as far as consumer needs are concerned. In addition, the local production is bound to go through the process of modernization.

Better methods of production will be realized in the host country. This can be explained from the fact the prevalence of competition among various firms producing similar products will be heightened. Hence, each firm will endeavour to produce the best in a bid to capture and maintain market leadership.

Nonetheless, fierce competition can also jeopardize a favourable marketing environment when local competitors crowd up for a single market (Clarke, 2005). This will especially be inevitable if a larger share of the market is dominated by the foreign affiliates. In addition, the balance of payment for the host country may be unfavourable especially in the event the situation persists for long.

This will be occasioned when funds are repatriated bearing in mind that international marketing that aims at expanding marketing portfolio does not deal with income generation from exports. Therefore, the impact of growth brought about by Direct Investment that aims at seeking efficiency is quite strong.

A business enterprise may also participate in international marketing through direct investment in order to accrue the benefits that arise from non-transferrable assets that cannot be transacted in an ordinary way.

The characterization of such non-transferrable assets is such that they can be exploited within the target country. As a result, the firm can only benefit from this type of asset by directly investing in the host country. That is the only way through which the asset can be accessed.

This rationale for direct investment can be put in place through the process of agglomeration. In such a case, proximity to other companies is a crucial consideration to make before setting up the project. Thus, the localization of the direct investment will largely depends on this factor.

Realistically speaking, a firm should preferably be located f where there is a cluster of other companies so that it can be in a better position to create better linkages with key payers in production. For example, consumers and suppliers in addition to the availability of the market endowed with adequate labour as well as spill over in technology are some of the open end benefits that can be accrued.

In the case of technology, it cannot be transferred across the border without losing some value especially if it was constructed using local unique skills and competences. As a consequence, a firm has to relocate some of its operations overseas in order to reap the optimum benefit of the asset.

As mentioned earlier, direct investment is basically capital flow on an international scale. This does not limit the level of control since foreign affiliates can still be coordinated by the mother company. With such, it implies that matters related to foreign exchange can significantly impact any direct investment arrangement in place, bearing in mind the unstable nature of currency exchange rates across the globe.

Perhaps, it would be pragmatic to first of all define the term. Exchange rate is the relative value of the domestic currency compared to the price of the foreign currency. At times, exchange rates can impact direct investment in international marketing in totality, as well as the allocation of this type of investment in multiple countries.

For example, currency depreciation which may occasion the movement in exchange rate can influence direct investment in two major ways. To start with, it brings about wage reduction in a country alongside lowering the cost of production compared to those of its affiliates abroad. Hence, it is definite that when exchange rate depreciates, the overall return of foreign investors will improve.

However, there are quite a number of considerations worth noting when discussing exchange rate level and its effect on foreign investment (Craig & Douglas, 2001). It is against this backdrop that forms will opt to invest in both developed and developing countries that are experiencing continual fluctuations in currency exchange rates (Perry, 1990).

It is indeed a financial windfall for firms engaging in direct investment in countries where the exchange rate is grossly volatile since the major factors of production and other associated financial overheads will be reduced accordingly. This remains to be a very strong motive why forms will invest in overseas countries.

Nonetheless, it should be noted that when currency exchange rates appreciate, the reverse effect on foreign investment is inevitable. Therefore, firms should always brace themselves for harder economic times or reduced returns during such eventualities.

One of the most important questions in international economics literature remains to be the effect of direct investment on the economies of the host country. Firstly, there has been concern over the benefits that accompany investments on the host economy and whether such benefits can boost production at the local level.

Secondly, concerns have also been raised over the possible costs that the domestic firms undergo when foreign multinationals secure their place in the local market.

Although these are pertinent questions worth inquiring, the multinationals seeking opportunities in international marketing often do not consider these queries beforehand. In spite of this, local conditions often streamline their operations even as they seek to improve efficient abroad.

For instance, production efficiency is likely to be enjoyed by the nature of the economies in both developed and emerging markets which are often open to accommodate foreign investment. Moreover, the institutional framework in place is also yet another boosting factor that sees into it that efficiency is attained by international firms undertaking direct investments.

This framework may be in form of the existing legislations such as hustle-free registration process, minimal certification requirements as well as optimal support from the government of the day (Shukla, 2006).

Operational efficiency that is being sought by an firm marketing itself internationally can also be easily attained due to the prevalence of technology gap especially in Less Developed Countries (LCDs).

Firms investing in countries that do have substantial technology base at their disposal may not only enjoy competitive advantage, it will also have the opportunity to improve its production efficiency since the immediate market rivals will still be lagging behind. In a similar development, efficiency in production will be at its peak owing to the competence and skill level of the available human resource.

There are quite a number of literature and empirical studies that have vividly documented the efficiency benefits in international marketing, in addition to the degree of spillovers in target countries. International firms often have the opportunity of enjoying numerous trade benefits from direct investments (Paliwoda &Thomas, 1998).

For instance, trade protection measures as well as certain host country restrictions may not affect the operations o Multi-national Corporations (MNCs). Although adequate literature that attempts to link trade effects with direct investment motivation are not readily available, foreign companies have myriad of trade benefits compared to their domestic competitors.

One outstanding benefit is the chance to serve the oversee market (Samiee, 2004). This is attributed to the fact that products manufactured by these firms do not necessarily go through the normal channels of distribution in the process of marketing and hence are not sensitive to trade barriers prevalent in the host country.

Foreign forms are also bound to benefit greatly when they operate in host countries where the management of important institutions is sound enough. These institutions can be divided into two main categories.

Firstly, those those are sensitive to socio-political factors like infrastructure and governance and those that touch on technological platform (Wilkinson, McAlister & Widmier, 2007). There is sufficient evidence that well established institutions have led to improved inflows of direct investment and export volume.

Export trade entails selling of goods and services to a foreign country. It is one mode through which enterprising firms can expand their production, distribution and sale volume.

The major difference between export trade and direct investment is that the latter case involves manufacturing in a foreign country while in the former case; production takes place in the domestic market. Indeed, export trade is the most common entry mode in global marketing.

Similar to direct investment in international marketing, firms engaging in exports also face myriad of barriers on a day-to-day basis. These trade barriers may be imposed either at the local or international market where the given products and services are destined.

For instance, governments may decide to restrict the inflow of certain foreign products in an attempt to create a protectionist policy towards shielding the local products from unfair competition. On the hand, trade policies that aim at accelerating exports of certain goods and services may be put in place by respective governments.

Another possible barrier to export trade is an international agreement that has been unanimously enacted by like-minded countries. such agreements may impede or boost the volume and nature of export from one geographical location to another.

Hence, exporting cycle requires four key players namely the government, the manufacturing firm, the importing agent as well as the transporter of the produced goods and services. In addition to the aforementioned restrictions, export trade may also be affected by tariffs (Osland, Taylor & Zou, 2001). Some tax regimes may be imposed on specific products either leaving or entering a country.

The prevalence of peace and stability through enforcement of legislation is a driving force for Multinationals to export in some emerging and developed markets. Bad elements of governance such as bureaucracy and graft have repelled firms wishing to export their products in international markets.

Good governance remains to be a motivating factor in exporting. A case study of some developing countries reveals that political upheavals such as coup de tats coupled with restrictive trade policies have limited the volume of international trade (Aslam, 2006).

Joint ventures

Joint venture is yet another entry strategy to international marketing. Multinationals engaging in joint ventures often find it a cheaper and viable alternative of expanding marketing portfolio. For instance, sharing of risks is one of the main merits of joint ventures.

However, this entry strategy will also demand that partners share the accrued benefits on an agreed basis (Doole & Lowe, 2007). On the same note, joint ventures facilitates expedited and smooth entry into foreign market since resources are pulled together while the risk profile at the entry point is significantly minimized.

While a single entrant into international marketing may not have the requisite technological platform, joint ventures assures of technological sharing in addition to providing a common front through which the weighty government regulations can be adhered to.

Besides, a warm relationship between or among the partners may enhance connections as well as creating a wider base for distributing products and services from the joint venture (Vanhonacker, 1997).

Nonetheless, it may be quite cumbersome to meet the requirements of successful joint ventures since this type of business alliance is complex both in terms of structure, objectives and strategies of partners involved. One major requirement for a successful joint venture is that the competitive goals of the partners should be different while there ought to be convergence in their strategic goals.

Furthermore, it is expected that the industry leaders should be above par in terms of the size of partners in a joint venture. Similarly, their resources and the abilty to influence the target market should be minimally low.

Moreover, the individual proprietary skills of the partners in a joint venture should not be used as benchmarks in running the new business establishment. It should be a unique business experience altogether; partners should be students to each other (Usunier & Lee, 2005).

In crafting an agreement before engaging in joint ventures, top priority issues worth being considered often include the ratio of ownership, risk and profit sharing, duration of the contract, pricing mechanics, role of government as well as the production and marketing ability of the local firms.

Others include resourcefulness of the partnering firms and transfer of technology. In the course of operation, this type of alliance may experience conflicting pressures due to diverging interests.

Although licensing is not a direct entry strategy in international marketing, it is considered as one of the imperatives for firms extending their operations in of foreign markets (Yaprak, 2008).

A company will only be legally permitted to operate in a foreign geographical location after a license has been granted. this is a mandatory legal requirement. The process of licensing may grant a company the right to certain aspects of trading such as techniques to be used in production and trademarks.

For all the countries where IBM is operating, registration of the organisation of the multinational corporation in the foreign country is required. Depending on the location of the project, IBM will often secure the appropriate registration certifications from the respective government agencies.

The method used to gather data for this paper was purely qualitative since no empirical research study was carried out. The information used was extracted from secondary sources which are also theoretical in nature.

This research methodology was found to be relevant because such theoretical data is more valid and easily obtainable than practical data. A research methodology that uses practical data may be extremely costly to undertake.

The historical development of IBM can be traced back even before the actual development of computing system was fully on board. It all started as a Tabulating Machine Company. It was incepted by Hollerith Herman towards the close of 19 th century (1896) and its line of specialisation was in the development of machines known as the punched card data (IBM, 2010).

However, this was not the first time this technology was being applied. It had earlier been used in 1884. The population Census of 1890 necessitated the demand for tabulating machines and the technology grew by leaps and bounds thereafter. The 1896 punched cards gave the impetus for the generation of machines which would later be referred to as IBM.

However, in 1911, the business exchanged hands when Charles Flint bought it at slightly over two million dollars. This enabled the original founder of the company to develop Computing Tabulating Recording Corporation (CRT) which was later incorporated on 16 th June 1911.

A merger of three companies took place whereby Flint as the key investor. His membership lasted until 1930. Elsewhere, the CTR management was taken over by Thomas J. Watson Sr. in 1914 and before the close of 1917; CTR established its presence in Canada with a brand name of International Business Machines Co. Limited which later transformed to IBM Inc. (IBM, 2010)

In order to explain entry strategies in international marketing discussed in literature review, a case study of IBM Inc. has been integrated in this study. IBM has grown over the years to emerge as one of the notable market leaders in the manufacturing of software and hardware used in computing systems.

It has a global presence as a multinational corporation dealing with all consultations related to Information Technology and latest technology in computers.

IBM and Bharti Airtel are currently running a joint venture in some African countries, a business model that has recorded significant success in India between the two partners. the two multinational giants began this alliance way back in 2004. As expected, their joint venture was occasioned by the need of both partners to expand their marketing on an international marketing.

However, it should be noted that it was IBM that sought to partner with Bharti Airtel, a telecommunication company. The latter needed IBM to set up its Information Technology (IT) infrastructure. As a result, IBM entered the foreign market as a single IT provider for Bharti Airtel.

For a limited period of time, IBM had already provided the much needed IT development in Airtel on the larger Indian network. This was apparently a lucrative business opportunity for both partners as expected in nay joint venture.

To date, the subscriber base for Bharti Airtel has grown to over one hundred and forty mullion from a meagre six million subscribers way back in 2005. The IBM entry strategy in India via Airtel is now being extended to some African countries, notably the East African block (IBM, 2010).

The joint venture is indeed expected to yield a win-win situation for both payers. At this point, it is crucial to mention that IBM’s operation in Africa has lasted for slightly half a century. The African market has absorbed above 300 million dollars in terms of solid investment.

The current Bharti Airtel-IMB venture is expected to erect IT support for telecommunication covering nearly 20 African states. Undoubtedly, this will pave way for IBMs international marketing even in countries where its products and services are still non-existent.

One of the IBMs direct investments in foreign marketing is found in Canada. It recently acquired Clarity systems as part of its expansion in international marketing. The main function of Clarity systems is the production of software systems that can be used to monitor financial governance.

Hence, organizations that make use of software product from Clarity systems are in a position to control their financial systems in a more harmonized system.

The acquisition of clarity systems by the International Business Machines (IBM) is indeed a real step in expanding marketing systems for the multinational company. The business initiatives of this multinational corporation have thus been extended with the new acquisition since it can now improve its business activities with the extra outlet.

In any case, the company is expected to assist companies that have been struggling with the analysis of financial management. The software is an inclusive solution for financial governance.

The analysis as well as the financial performance of companies can now be executed using the software from IBM. It is a business solution that has enabled business professionals forecast possible risks that companies can face.

For instance, external stakeholders are in a position to obtain the much need report of their company with the use of the software from IBM (Fernie & Arnold, 2002). Improving risk management by business organizations is a very momentous requirement that any prospective organisation cannot avoid.

For IBM, acquiring Clarity Systems is a form of direct investment that will not only witness growth in production but also increase the volume of international marketing of its products. Besides, the analysis on the performance of the software has revealed that it has enabled business organizations to strengthen their financial management programs.

Besides, Clarity Systems software is being used by several companies across the globe, not just within Canada. Indeed, the acquisition is a perfect example of an organisation can engage in international marketing through acquisition; a form of direct investment (Prahalad & Hammond, 2002).

Technology and innovation has been the stronghold of IBMs growth potential. In order to expand its production and marketing capacity, IBM has engaged itself in direct investment in most countries in the world in spite of the fact that it has equally withdrawn operations in some countries due to reduced earnings. Brazil marks one of the latest entrants of IBM in international marketing.

The multinational company ventured into Brazil market way back in 2009 with the aim of producing computer software and hardware from locally available resources.

The city of Sao Paulo was the venue of IBM launch in Brazil whereby the corporation hosted a forum for entrepreneurs. In the forum, IBM invited major players in the field of IT including government agencies. So far, the company has directly invested heavily in the IT industry. It has facilitated the creation of various IT tools to aid in knowledge acquisition of information technology.

For instance, developerWorks was set up by IBM with the aim of facilitating the process of teaching IT in different levels. Further, the Portuguese site offers free programs and learning modules to specific type of IT enthusiasts.

Host countries that have proved of shrewd governance have continued to attract foreign investors in large numbers. Indeed, the prevalence of peace and stability through thorough enforcement of legislation is a driving force Multinationals to invest in some developing and developed countries.

Bad elements of governance such as bureaucracy and graft have repelled firms wishing to secure investment in foreign countries (Vrontis & Vronti, 2004).

Good governance remains to be a motivating factor for FDI to flourish. Although regimes vary both in governance styles and ability to host FDI from foreign Multinational Corporations, it is common perception that politically stable governments are bound to attract more foreign investment compared to volatile political environments.

A case study of some developing countries reveals that political upheavals such as coup de tats have scared away investors a great deal. In spite of the aforementioned motives why companies will opt for FDI, it is vital to note that internalization of a business enterprise has its own share of challenges and positive attributes.

To begin with, FDI has the potential to increase domestic level of employment, that is, the host country benefits from employment creation (VanPottelsberghe & Lichtenberg, 2001).

In addition, in the event that the much needed infrastructure by the firm engaging in FDI is not adequate or unavailable altogether, the Multinational Corporation will invest in the infrastructure to the benefit of the host country. since FDI concentrates its effort in the flow of capital from the host country to the parent company through exports, the balance of payment for the host country is bound to be influenced positively.

This will go a long way in developing the technical efficiency of domestic supplies who will have gained the necessary knowledge, skills and competences from the operations of the Multinational Corporations (Cantwell & Narula, 2001).

In course of their operations, there will be transfer of technological know-how from the firm to the host country and consequently improve capital investment through the both the vertical and horizontal development. The demerits of FDI to the host country cannot be ignored (Sebenius, 2002). For instance, firms engaging in DFI often dominate the industrial sector thereby hampering the growth of domestic companies.

As technology flows from FDI to local firms, it leads to dependency syndrome by the local firms on imported technology. Worse still, ethnocentric staffing of Multinationals has also eroded the native culture since these firms are mainly managed by individuals from country while the subordinate positions are held by the local staff. Most MNCs have recorded impressive growth in their FDI activities.

However, there are pertinent investment factors that can be put in place in order to boost their returns. Some host countries are already reforming their trade policies by limiting the number of trade barriers and restrictions that have impeded foreign investment.

Better still, there are fewer limitations to currency repatriation in order to promoted FDI (Anderson & van Wincoop, 2004). Besides, nations are also formulating sound and friendly company policies and code of ethics that enhance international trade and capital flow.

The analysis of international marketing and modes of entry as well as the motives why firms opt to engage such market has been on-going for considerably long period of time. Nevertheless, there are some components of international marketing which economic literature has not adequately explored.

In spite of this, it is vital to reiterate that direct investment refers to capital inflow in form of trade investment from foreign countries. It is increasingly becoming an expansion strategy for firms wishing to diversify their product and service portfolio as well as returns.

Three main motives stand out as the motives why firms would roll out a given entry strategy abroad. Firstly, the desire to seek resources overseas is top in the list. Whereas technology and managerial issues may not be a real concern for firms engaging in FDI, the accessibility of cheap and skilled labour is of utmost importance and can only be availed by expanding business operations abroad where such resources are located.

Other important factors of production that may be of economic interest to Multinational Corporations expanding overseas include raw materials and favourable weather and climatic patterns.

Secondly, seeking markets has also been established as a sound reason why firms will invest in a foreign country. The domestic market is often saturated with both substitute and complimentary products from rival firms. By reaching out other developing and developed countries, the market portfolio is definitely doubled.

Finally, the need to obtain non-transferable assets like skilled and unskilled labour from the host country has also been a major driving factor to invest abroad.

Although the data used in this research paper is relatively reliable, there are quite a number of limitations with the use of qualitative data. There is no empirical study that was carried on this research paper. All the information and data gathered were from secondary sources, preferably peer reviewed journals.

It is strongly recommended that future research on this topic should be more quantitative and empirically-based. This will create a more valid ground for arguing recent entry strategies in international marketing.

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Clarke, G. 2005. International Marketing Environment Analysis, The Marketing Review , 5:159- 173.

Craig, C. S. & Douglas, S. P. 2001. Conducting international marketing research in the twenty first centuries, International Marketing Review , 18(1): 80-90.

Doole, I. & Lowe, R. 2007. International Marketing Strategy: Analysis, Development and Implementation, 5 th edition, International Thomson.

Fernie J. & Arnold, S. J. 2002. Wal-Mart in Europe: prospects for Germany, the UK and France, International Journal of Retail and Distribution Management , 30(2): 92-102.

IBM. 2010. IBM Archives. Retrieved from https://www.ibm.com/ibm/history/history/decade_1880.html

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Prahalad, C. K. and Hammond, A. 2002. Serving the world’s poor, profitably, Harvard Business Review , September, 48-57.

Roberts, G. H. 2005. Auchan’s entry into Russia: prospects and research implications, International Journal of Retail and Distribution Management , 33(1): 49-68.

Samiee S. 2004. International marketing in Southeast Asia, International Marketing Review , 21(3): 247-54.

Sebenius, J. K. 2002. The hidden challenge of cross-border negotiations, Harvard Business Review , March, 76-85.

Shukla, P. 2006. Emerging paradigms in the Indian marketplace, Asia Pacific Journal of Marketing and Logistics ,18(2): 249-53.

Usunier, J. & Lee, J. A. 2005. Marketing Across Cultures , 4 th edition, FT/Prentice Hall.

Vanhonacker, W. 1997. Entering China: An unconventional approach, Harvard Business Revew , March-April.

Vrontis, D. & Vronti. P. 2004. Levis, Strauss: An international marketing investigation, Journal of Fashion Marketing and Management , 8(4): 389-398.

Wilkinson, T. J., McAlister, A. & Widmier, S. 2007. Researching the international consumer: An assessment of the international direct marketing environment, Direct Marketing: An International Journal , 1(1): 17-37.

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Home • Knowledge hub • Research to Launch: A Comprehensive Guide to Market Entry into the UK.

Research to Launch: A Comprehensive Guide to Market Entry into the UK.

Entering a new market is an exciting and challenging journey for any company. The United Kingdom, with its diverse and well-developed economy, is an attractive market for many businesses. However, market entry in the UK can be complex and challenging, with many obstacles to overcome.

This article provides a roadmap for companies considering market entry in the UK. It will help companies overcome the challenges of entering a new market and take advantage of the opportunities that the UK has to offer.

“Bringing a new product to the UK market requires a deep understanding of local consumer needs and preferences, as well as a commitment to providing high-quality customer service.” – Sir Martin Sorrell, founder of WPP, the world’s largest advertising and marketing company.

We will cover the key steps in the market entry process, from conducting market research to launching a product or service in the UK. We will discuss the importance of market research, the regulatory environment, target market and segmentation, competition analysis, marketing and sales strategy, channel and distribution strategy, financing and funding, and launch plan.

Whether you are a start-up or an established business, this article will provide the information and guidance you need to enter the UK market successfully. The goal is to equip readers with the tools and knowledge to make informed decisions and achieve their market entry goals.

By the end of this article, you will have a better understanding of the challenges and opportunities of market entry in the UK and a clear plan for navigating the process from research to launch.

Market Entry Market Research 

Market research is crucial in market entry, providing valuable information about the target market, competition, and consumer trends. With proper market research, companies can avoid making costly mistakes, such as entering an unprofitable market or failing to differentiate from the competition.

There are two main market research types: secondary and primary. 

Primary research involves collecting data directly from potential customers and stakeholders. This type of research can be more time-consuming and expensive, but it provides valuable insights into the target market, competition, and consumer trends. Some standard primary research methods include surveys, focus groups, and interviews. 

Secondary research involves gathering data from industry reports, government statistics, and market reports. This type of research is relatively low-cost and quick to complete, making it a good starting point for market research.

Gathering data on the target market, including demographic, psychographic, and behavioral data, is important when conducting market research. This information can be used to segment the target market and develop a marketing strategy that will resonate with the target audience. 

Brands should also conduct a competition analysis to understand the strengths and weaknesses of competitors, including their market position, marketing strategies, and target segments.

To gather data on consumer trends, companies should pay attention to industry reports and consumer surveys and follow news and social media to stay up-to-date on the latest trends and preferences.

UK Regulatory Environment

The UK is generally considered a friendly and attractive market for new brands seeking to enter. It is known for having a stable and well-established legal system, a large and affluent consumer market, and a well-developed infrastructure for doing business. The UK is also part of the EU, which provides access to a market of over 500 million consumers.

However, like any market, the UK has unique challenges and complexities. For example, the UK has a relatively high level of regulation, particularly in data protection, health and safety, and environmental conservation. This can create additional compliance and administrative costs for companies.

When compared to other countries, the UK is a favorable market for new brands, products, and services, particularly when compared to emerging markets, which may have more political, economic, or regulatory risks. However, it is vital for companies to consider their specific needs and objectives carefully and to conduct a thorough market analysis before deciding to enter the UK market.

The legal and regulatory environment for doing business in the UK is complex and requires careful consideration by companies seeking to enter the market. 

Brands need to understand the legal and regulatory framework for doing business in the UK and seek professional advice as necessary. This will help ensure that your company fully complies with all relevant laws and regulations and can operate effectively and efficiently in the UK market. 

The following are some of the key aspects of the regulatory environment that companies need to be aware of:

• Visas: If you or your employees are from outside the European Union (EU), you may need to obtain a visa to work and conduct business in the UK. There are several types of visas available, including work visas, business visas, and investor visas, and each has its requirements and restrictions.
• Setting up a business: To set up a business in the UK, you will need to choose the type of business structure you want to use, such as a sole trader, partnership, limited liability partnership, or limited company. You will also need to register your business with Companies House, the UK’s official register of companies.
• Registering for taxes: Once you have set up your business, you must register for taxes with HM Revenue & Customs (HMRC). This includes registering for corporation tax, value-added tax (VAT), and paying applicable taxes and national insurance contributions.
• Relevant laws and regulations: Organizations must be aware of applicable laws and regulations to their specific business sector, including health and safety regulations, data protection laws, and environmental regulations. For example, companies selling products in the UK must comply with the Consumer Contracts Regulations, which set out the rights of consumers when buying goods or services online.
• Policies: Brands must also be aware of relevant policies impacting their business, such as the UK’s Brexit agreement and all applicable trade agreements with other countries. Brands must also be mindful of any policies related to Brexit, such as customs procedures and tariffs.

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Import/Export Regulations and Tariffs

Import and export regulations and tariffs play a crucial role in the success of a market entry in the UK, and companies should carefully research and understand these regulations before entering the market. 

One crucial aspect to consider is the United Kingdom’s membership in the European Union, which affects trade between the UK and other EU countries. With the UK’s departure from the EU in 2021, businesses must navigate new trade agreements and regulations when importing or exporting goods between the UK and the EU.

Additionally, companies should be aware of any taxes or duties that may apply to their products or services and understand the process for obtaining any necessary licenses or permits. This can include value-added tax (VAT), customs duties, and excise taxes.

We recommend that companies seek advice from legal and tax experts to fully comply with all UK import/export regulations and tariffs. This can help minimize the risk of delays or fines and provide a smoother market entry process.

UK Target Market and Segmentation

Identifying and segmenting the target market is critical to a successful market entry strategy in the UK. The following are some main steps for identifying and segmenting the target market in the UK:

• Demographic data: Collect data on the age, gender, income, education level, and other demographic characteristics of the target market in the UK. This information can be found from secondary sources, such as government statistics, or through primary research methods like surveys or focus groups.
• Psychographic data: Gather data on the values, beliefs, lifestyle, and personality characteristics of the target market. This information can be obtained through focus groups, interviews, or other qualitative research methods.
• Behavioral data: Collect data on the target market’s purchasing habits, product usage, and decision-making process. This information can be garnered through surveys, customer interviews, or other research methods.

Once you have collected this information, you can segment the target market into smaller, more defined segments with similar characteristics. This allows you to develop a more focused and effective marketing strategy that will resonate with the target market.

For example, let’s assume your target market is predominately young and tech-savvy consumers. In that case, you might focus your marketing efforts on digital channels such as social media, influencer marketing, and e-commerce platforms. Conversely, if your target market is more mature and traditional, you might focus your marketing efforts on more traditional channels such as print advertising, direct mail, and in-store promotions.

Localization: Understanding the Local Culture, Traditions, and Values

The United Kingdom has a rich and diverse culture, with a unique set of traditions and values deeply rooted in its history. By taking the time to understand and appreciate the UK’s local culture, traditions, and values, brands can increase their chances of success in the market.

“The UK is one of the world’s largest and most developed consumer markets, offering a wealth of opportunities for brands looking to reach new audiences.” – Richard Branson, founder of the Virgin Group.

Localization is adapting products and services to meet the specific needs and preferences of the local market. This includes everything from product design and packaging to marketing and customer service. Brands that take the time to localize their offerings are more likely to resonate with the target audience and build a strong brand image in the market.

There are several factors that brands should consider when localizing their products and services for the UK market, including:

• Language: English is the official language of the UK, but there are regional variations and dialects that brands should be aware of. Companies should ensure that their marketing materials, product labels, and customer service are written in clear, concise English that is easy to understand.
• Measurements and Units: The UK uses a different system of measurements and units compared to other countries. Brands should ensure that their products and packaging are labeled in the appropriate units to avoid customer confusion.
• Cultural and Social norms: Brands should familiarize themselves with the cultural and social norms of the UK, including holidays, traditions, and customs. This will help them to avoid offending customers and create a positive brand image in the market.
• Consumer preferences: Brands should research the consumer preferences of the UK market to ensure that their products and services meet the needs and wants of their target audience. This includes everything from product features and design to pricing and marketing.

Competition Analysis

UK consumers generally have a positive attitude towards new and foreign brands entering their market. They are known for being open-minded and curious and are often willing to try new products and services from different countries.

However, it’s important to note that new and foreign brands need to be well-prepared and understand the unique characteristics of the UK market. They should be able to differentiate themselves from local competitors and offer a unique value proposition to UK consumers.

“The UK is a great place to do business, with a highly skilled workforce, low levels of corruption, and a supportive legal system that makes it easier to protect intellectual property.” – Bill Gates, co-founder of Microsoft.

Conducting a competition analysis is essential in understanding the UK’s competitive landscape and developing a successful market entry strategy. The following are some tips for conducting a competition analysis:

• Identify main competitors: Start by identifying the key competitors in the UK market. This can be done through online research, industry reports, and other secondary sources.
• Analyze market position: Assess the market position of each competitor, including their market share, brand awareness, and customer loyalty. This information can help you understand their strengths, weaknesses, and market position.
• Evaluate marketing strategies: Analyze the marketing strategies of each competitor, including their advertising, promotions, and distribution channels. This information can help you understand how they are reaching their target market and what makes them unique.
• Assess target segments: Identify the target segments of each competitor and understand how they are positioned in the market. This information can help you understand how each competitor differentiates themselves in the market and what opportunities may exist for your brand.
• Evaluate strengths and weaknesses: Evaluate the strengths and weaknesses of each competitor, including their product offerings, pricing strategy, and customer service. This information helps you identify areas where your brand can differentiate itself.

Marketing and Sales Strategy

The following are some key steps to consider when creating a marketing and sales strategy:

• Create a Unique Value Proposition: Develop a unique value proposition that differentiates your brand from the competition. Consider the needs and desires of the target market and what makes your brand unique.
• Conduct a SWOT analysis: Conduct a SWOT analysis to identify the strengths, weaknesses, opportunities, and threats of your brand. This information can help you develop a marketing and sales strategy that leverages your strengths and minimizes your weaknesses.
• Develop a marketing mix: Develop a marketing mix that includes product, price, promotion, and place. Consider the target market, competition, and consumer trends when developing each element of the marketing mix.
• Choose the right channels: Choose the right channels to reach and engage with the target market. This may include online channels such as social media, email marketing, and display advertising, and offline channels such as events and trade shows.
• Measure and adjust: Continuously measure and adjust the marketing and sales strategy to ensure that it is effective and achieves desired results. This may include adjusting the marketing mix, refining the target market, or adjusting the sales strategy.

Brand Awareness: Establishing Your Reputation in the UK Market

Brand awareness is one of the most crucial factors in establishing a successful market entry in the UK. A strong brand presence can help companies gain credibility and attract customers, making it essential for companies to invest in targeted marketing and PR efforts. There are several key strategies for building brand awareness in the UK, including:

• Develop a Unique Value Proposition: Companies must differentiate themselves from the competition by creating a unique value proposition that sets them apart. This could be innovative products, exceptional customer service, or a commitment to sustainability, for example.
• Utilize Digital Marketing: The UK is a highly digitized market, and companies must utilize digital channels to reach their target audience. This includes social media, email marketing, and search engine optimization (SEO), among others.
• Leverage Influencer Marketing: Influencer marketing is a powerful tool for building brand awareness in the UK. Companies can work with influencers who align with their brand values and have a large following on social media platforms to reach their target audience.
• Attend Trade Shows and Events: Attending trade shows and events can help companies meet potential customers, showcase their products and services, and build their brand reputation in the UK.
• Invest in PR: Investing in PR can help companies establish their brand in the UK by securing media coverage and building relationships with key stakeholders.

Building brand awareness in the UK requires effort and resources, but the payoff can be significant. Companies that invest in targeted marketing and PR efforts are more likely to build a strong brand presence, attract customers, and achieve long-term success in the UK market.

Partnerships and Alliances

It is essential for companies entering the UK market to have a clear understanding of the local business landscape and the opportunities available for forming partnerships and alliances with local businesses. 

These relationships can offer numerous benefits, including access to local knowledge and established networks and distribution channels that can help companies quickly establish themselves in the market.

When identifying potential partners, companies should consider businesses with complementary products or services and a similar target market. Networking with local organizations and industry groups can also be a great way to identify potential partners and participate in trade shows and events specific to the industry.

Brands should also consider the type of partnership or alliance most beneficial for their business. For example, a joint venture can provide shared resources and risk-sharing, while a strategic alliance can offer opportunities for collaboration and increased market share. On the other hand, a distribution agreement can provide access to established distribution channels and speedier entry into the UK market.

Channel and Distribution Strategy

A well-designed channel and distribution strategy is critical for successful market entry in the UK. By identifying target market needs, evaluating distribution options, choosing the right channel, developing partnerships, and continuously monitoring and adjusting the strategy, brands can ensure that their products are effectively and efficiently distributed to the target market. 

Customer Service in the UK

The UK is known for having high standards when it comes to customer service, and customers expect a quick response to their inquiries and a high level of support.

To meet these expectations, companies should invest in the right infrastructure to support their customers, such as a well-staffed call center or online chat service. Brands should also consider offering a variety of channels for customers to reach out, including email, phone, and social media.

In addition to investing in customer service infrastructure, companies should also focus on providing high-quality service. This means training customer service representatives to be knowledgeable, friendly, and effective in resolving customer issues. Brands should also have clear policies and procedures to handle customer complaints and ensure customer satisfaction.

Finally, brands should strive to create a positive customer experience that sets them apart from the competition. This may include offering a loyalty program, creating a helpful and user-friendly website, or providing value-added services to enhance the customer experience.

Financing and Funding

Entering a new market, such as the UK, often requires significant financial resources. Careful planning and execution are critical for securing the financing and funding necessary to support a market entry into the UK. It is essential to consider all the options for financing and funding a market entry to ensure that the venture has the resources it needs to be successful. The following are some key points to consider:

• Determine funding needs: Establish a clear understanding of the funding required to support the market entry. This should include an estimate of the costs associated with product development, marketing, distribution, and other essential activities.
• Explore financing options: Consider all available financing options, including loans, grants, crowdfunding, and others. Evaluate the advantages and disadvantages of each option in terms of interest rates, repayment terms, and other key terms.
• Secure funding: Secure the necessary funding by applying for loans, grants, or crowdfunding. Be prepared to provide a detailed business plan and financial projections to support the application.
• Plan for cash flow management: Establish a cash flow management plan to ensure the business has the resources it needs to meet its obligations as they come due. This may include forecasting cash flows, establishing lines of credit, and other measures.

Market Monitoring: An Ongoing Process for Successful Market Entry in the UK

Ongoing market monitoring and analysis are critical components of a successful market entry in the UK. As the market and consumer trends evolve, companies must continually gather data to stay informed and adapt their strategies. To succeed, companies need to understand the market landscape and be able to respond quickly to changes.

Market monitoring enables companies to stay informed about market trends, consumer behavior, and competitive activity. This information can help brands make informed decisions about product development, marketing, and distribution strategies. Companies can also use market monitoring to identify new opportunities and areas for growth in the UK market.

There are several ways companies can gather market intelligence and monitor the UK market, including:

• Conducting market research and surveys to gather data on consumer preferences and behaviors.
• Monitoring sales trends and customer feedback to understand customer needs and preferences.
• Keeping a close eye on the competition and their activities, including new product launches, marketing campaigns, and distribution strategies.
• Utilizing market intelligence platforms and reports to access up-to-date data on market trends and consumer behavior.
• Engaging with industry experts and local organizations to stay informed about market developments and trends.

Brands should invest the time and resources to continually gather market intelligence and monitor their performance in the UK market to ensure continued success.

How market research can help you with your UK market entry goals 

Market research is essential in any market entry strategy, and the UK is no exception. Brands looking to enter the UK market should take the time to understand the country’s target audience and consumer behavior. This involves market research to gather insights into consumer preferences, behaviors, and buying patterns. This information can then be used to tailor products and services to meet the needs of UK consumers, increase brand awareness, and improve marketing efforts.

It is also essential for companies to assess the competition and market saturation in the UK. This includes analyzing the market size, growth potential, and key players in the industry. This information can help companies identify trends and opportunities in the market and determine the best strategies for differentiating their products and services from those of their competitors.

In addition to market research, companies should conduct a SWOT analysis to evaluate their strengths, weaknesses, opportunities, and threats in entering the UK market. This involves considering the internal and external factors that may impact their ability to succeed, including their resources, capabilities, market position, and competition. By conducting a thorough SWOT analysis, companies can identify areas for improvement and develop a more effective market entry strategy.

Conclusion and Key Takeaways

Market entry into the UK can present significant opportunities for companies looking to expand their reach. However, it is essential to approach this process with careful planning and preparation to ensure success. From conducting thorough market research to understanding the legal and regulatory environment, companies need to consider a range of factors to ensure a successful entry.

“The UK is known for its innovative and entrepreneurial spirit, and companies that are able to tap into this energy and creativity can achieve great success in the market.” – Lord Alan Sugar, British business magnate, investor, and politician.

The key takeaways from this blog include the importance of:

• Conducting thorough market research to understand the target market, consumer trends, and competition.
• Familiarizing yourself with the legal and regulatory environment, including obtaining visas, setting up a business, and registering for taxes.
• Developing a marketing and sales strategy that resonates with the target market and differentiates from the competition.
• Securing the necessary financing and funding to support market entry.

We hope this comprehensive guide has provided valuable information and insights to help companies considering market entry in the UK. However, this is just the beginning. Brands should also seek additional resources and support to ensure a successful entry, such as consulting with market experts, consultants, or lawyers.

We wish you the best of luck in your market entry journey and encourage you to be proactive, strategic, and well-prepared as you navigate the opportunities and challenges of entering the UK market. Kadence International has 30+ years of experience in market research and is more than happy to discuss your UK market research needs.

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Kadence’s reports give us the insight, conclusion and recommended execution needed to give us a different perspective, which provided us with an opportunity to relook at our go to market strategy in a different direction which we are now reaping the benefits from. Sales & Marketing Bridgestone

Kadence helped us not only conduct a thorough and insightful piece of research, its interpretation of the data provided many useful and unexpected good-news stories that we were able to use in our communications and interactions with government bodies. General Manager PR -Internal Communications & Government Affairs Mitsubishi

Kadence team is more like a partner to us. We have run a number of projects together and … the pro-activeness, out of the box thinking and delivering in spite of tight deadlines are some of the key reasons we always reach out to them. Vital Strategies

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The UK market is complex and well developed, and a leader in product research and development.  Companies considering entering the market with established products must demonstrate a clear value proposition and competitive advantage (e.g., price, quality, branding).

Companies should pay close attention to cultural differences between the United States and the United Kingdom and adjust marketing strategies accordingly.  In particular, language usage in marketing and on packaging materials should be reviewed by a native British English speaker as word meanings and connotations differ between the UK and the United States. 

Online marketing and offers of delivery options are very popular with consumers in cities.  Well-established local distributors are key to success, along with evaluating prospective partners carefully.  Offering flexible business arrangements during this period of economic uncertainty will show a commitment to the market for the long term. 

The U.S. Commercial Service at the U.S. Mission to the United Kingdom helps support and protect U.S. commercial interests by counseling U.S. firms on UK market entry requirements, standards, and legislation; monitoring legislative and regulatory developments that could impact U.S. business; reducing technical barriers to trade; and working with and advocating on behalf of U.S. companies to ensure that the UK remains open to U.S. commercial activity, including for small- and medium-sized enterprises.

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Entry market strategy

Introduction of entry market strategy

Strategy is planning through companies achieve their goals and move forward. A company makes a decision to enter an international market, this strategy works to expand its wings. Company could use many ways to get it. These ways can be a shade of company’s strength, potential and the level of interest in marketing. Exporting is main entry strategy in international arena which can be used direct or indirect mode. A company’s aim to international market can require minimal investment and be limited to infrequent exporting with title thought given to market development. Or a company can make large investments of capital and management effort to capture and maintain a permanent, specific share of world market. Both approaches can be profitable. Entry market strategy can be fulfilled through these mechanisms.

Piggybacking

Franchising, joint venture, manufacturing.

A company can decide to enter foreign market by exporting from home country. This means of foreign market development is the easiest and most common approach employed by companies taking their first international steps because the risk of the financial loss can be minimised. Many companies engage in exporting as their

major market entry method

. Generally early motives are to skim the cream from the market or gain business to absorb overheads. Even though such motives might appear opportunistic, exporting is sound and permanent from of operating in international marketing.

Piggybacking occurs when a company (supplier) sells its product abroad using another company’s (carrier) distribution facilities. This is quite common in industrial product but all types of product are sold using this method. Normally piggybacking is used when the companies involved have complementary but non- competitive product. Some companies use this method to share transportation costs and some companies do it purely for the profits as they can make profit on other companies (suppliers) products. This method also can be used a first step towards a company’s own international activities to test the market. This particularly advantageous for small firms as they often lack the necessary resources. Once they realise the market potential, they can start their own exporting.

A mean of establishing a foothold in foreign markets without large capital outlays is licensing patent rights, trademark rights and the rights to use technological processes are granted in foreign licensing. It is favourite strategy for small and medium-sized companies although by no means limited to such companies. Not many companies confine their foreign operations to licensing alone. It is generally viewed as a supplement to exporting or manufacturing rather than the only means of entry into foreign market. The Advantages of licensing are most apparent when capital is scarce, when import restrictions forbid other means of entry, when a country is sensitive to foreign ownership or when it is necessary to protect patents and trademarks against cancellation for non use. Although this may be the least profitable way of entering a market but the risks and headaches are less than for direct investments.

Franchising is a rapidly growing form of licensing in which the franchiser provides a standard package of products, systems and management services and the franchise provides market knowledge, capital and personal involvement in management. The combination of skills permits flexibility in dealing with local market condition and yet provides the parent firm with a reasonable degree of control. Potentially the franchise system provides an effective blending of skills centralisation and operational decentralisation and has become increasingly important form of international marketing.

Joint ventures one of the more important types of collaborative relationship, have accelerated sharply during the past 20 years. Besides serving as a means of lessening political and economic risks by the amount of the partner’s contribution to the venture, joint ventures provide a less risky way to enter markets that pose legal and cultural barriers than would be the case in the acquisition of the existing company. A joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity. Joint ventures should also be differentiated from minority holdings by an MNC in a local firm. Four factors are associated with joint ventures.

Another means of foreign market development and entry is manufacturing within a foreign country. A company may manufacture locally to capitalise on low cost labour to avoid high import taxes to reduce the high cost of transportation to market to gain access to raw materials and or as means of gaining market entry. Seeking lower labour costs offshore is no longer an unusual strategy. A hallmark of global companies today is the establishment of manufacturing operations throughout the world. This is a trend that will increase as barriers to free trade are eliminated and companies can locate manufacturing wherever it is most cost effective.

Illustration of entry strategies for some organisations

entered in UK, was the first European country. The UK provided facilitation this company to expand its business in Europe. That has been a milestone of its achievements and to go into a foreign market. Strategy was taken by Starbucks to enter and fulfil new or all sort of market, encourage country’s culture and traditions. Recently three different strategies are used in starbucks

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21 Elements of a Smart Market Entry Strategy

Tips / 08.11.2024

Do you feel it’s time for your business to move to the next level and explore the opportunities hidden in foreign countries?

Tapping into a new market can be extremely exciting and rewarding. However, it also comes with challenges and factors to consider closely.

The following sections introduce 21 must-have elements of a smart market entry strategy. Knowing them will help you plan, make informed decisions, and maximise your business results in any foreign country.

TABLE OF CONTENTS

What are Market Entry Strategies

Comprehensive market research, target market definition, market demand analysis, competitive landscape assessment, clear market entry objectives, selection of market entry mode, unique value proposition development, detailed marketing plan, establishment of distribution channels, strategic pricing strategies, defining payment types, adaptation to local regulations and culture, formation of strategic partnerships, securing financial resources, implementation timeline and milestones, risk management and contingency planning, brand positioning and messaging, sales and customer service strategy, talent acquisition and training, technology and it infrastructure, legal and compliance considerations.

Before we discuss the elements to consider before entering foreign markets, let’s first understand what market entry strategies are.

Simply, a market entry strategy represents a strategic plan for penetrating a new market and introducing its products or services to the international market. This plan features essential elements that help guide the company in operating in specific foreign countries. 

These elements include understanding the local market, the steps for international expansion, the expenses of foreign operations, marketing costs for building brand recognition and reaching customers, and more.

In most cases, the need for market entry strategies arises once a company has already managed to gain strength in its domestic market, and the next natural growth stage is exploring an overseas market.

For example, let’s say a company from the UK is evaluating the potential of entering the Chinese market. The company must acknowledge key cultural differences, language barriers, potential market challenges, and more. All of this is part of the market entry strategy.

Below, we outline 21 of the most essential elements of a smart market entry strategy. 

The first and most important aspect of a new market entry strategy is thorough research. No matter your industry or business size, entering new markets is bound to involve a range of obstacles and opportunities. Being aware of these through an in-depth foreign market entry strategy can dramatically boost your chances of achieving global success. 

You’ll need the following market research insights to make informed decisions:

• Market size;
• Growth trends;
• Consumer behaviour;
• Economic conditions and more.

These are just a few basic examples of the information you need on the foreign country you’re assessing. This data will help you establish whether the market has enough growth potential to justify your investment and time. 

Your market research can help you gain valuable insights into target markets, unlocking new and exciting opportunities.

When tapping into a new market, being fully aware of your target market is also fundamental.

What are your audience demographics in a foreign country? Where do your ideal customers live? Are there any specific customer segments that you’ll be serving? What’s the purchasing power of your target market? What are their main interests, hobbies, and pain points?

Finding the answers to these questions will prepare you to satisfy demand, communicate effectively with your audience, and land more sales in a foreign market.

Once you’ve collected your market and target audience information, it’s time to get more specific and concentrate on  market analysis .

How attractive are your products or services in the foreign market? Are there significant differences you need to acknowledge and perhaps make changes to your offering? 

For example, some flavours are preferred in certain countries while being entirely written off in others. This is why some of the major beverage brands in the world, for instance, adapt their products to be either saltier or sweeter based on taste preferences. 

When preparing your market demand analysis, don’t forget to make a detailed list of consumer preferences, income levels, and substitutes. This can help determine whether the local market will respond well to your products or services.

Another essential point to assess is the competitive landscape.

What are local companies in your niche doing to attract customers? How are they pricing their products or services? What marketing channels do they use to attract and engage the right audience? 

This assessment will enable you to spot gaps that your offering can fill and identify best practices that can help you succeed in the new market.

Before you enter a foreign market, it’s vital to set clear, measurable, and very specific objectives. 

For instance, your objectives may include reaching a certain level of sales before a given period. For other companies, a market entry objective might be acquiring a specific market share or establishing a local presence with the help of strategic alliances. 

No matter what your goals are, make sure they’re thoroughly outlined and addressed when preparing your market entry plan.

You can use different types of foreign market entry strategies to tap into a foreign market. 

The right one for you will depend on factors like the level of risk you’re prepared for, the need for significant resources, the level of control you’d like to keep, and more. 

The most popular entry modes are direct exporting, indirect exporting, joint ventures, wholly-owned subsidiaries, turnkey projects, and licensing agreements. Before you make your choice, we highly recommend gathering as much information as possible on each and evaluating their advantages and drawbacks. 

For instance, companies looking for complete control can take advantage of the wholly owned subsidiary model or joint venture agreement. On the other hand, those interested in options with minimal risk can go for indirect exporting via export management companies or management and trading companies.

When entering a new market, standing out from the crowd with a unique  value proposition  is fundamental. This component alone can make or break your long-term success in a foreign country.

Develop a plan for presenting and communicating your offering’s perks, demonstrating how it differs from others and why it’s suitable for the local market. 

A transparent and easy-to-understand value proposition that resonates with the customer base is essential for positioning yourself competitively on the market.

Let’s not forget about the importance of a marketing plan.

Marketing is essential for strengthening your presence and visibility in local and foreign markets. It’s your ticket to brand awareness, sales, and returning customers. When preparing your marketing plan, closely analyse the available advertising channels, digital marketing strategies, and promotional techniques you can rely on to appeal to the target customers in the selected region.

Explore opportunities for:

• Email marketing;
• Social media marketing;
• Influencer marketing;
• Content marketing;
• Paid ads and others.

Remember that result-proven strategies, prices, and techniques can vary dramatically from your local market.

Distribution channels are another crucial component to think about. 

Your choice of distribution channels will ultimately impact how quickly your products reach your customers, at what cost, and with what quality. You can explore different options, such as relying on local companies, direct sales, or partner companies for your distribution.

Note that working with local distributors or management and trading companies can add extra benefits. For example, you could access local knowledge and gain valuable information on sub-markets.

Another vital component or market entry that can strongly influence your performance in a foreign market is  pricing.

The pricing strategy you choose to rely on can be fundamental to achieving results in international trade. To achieve maximum results, acknowledge the peculiarities of the new market and adapt your local pricing adequately. This means factoring in purchasing power, income levels, local laws, and competition.

Be as flexible as you can, but don’t compromise your pricing, which will eat away your profit margins.

As part of running a business abroad, do your research on popular payment types in the international markets you’re considering.

For example, while  online payments  may dominate in one market, cash payments may still be preferred in another. Don’t forget that what works for you in your home market and parent company may not necessarily be the best option for the new market. 

Analyse foreign company payment options to see what types of payments your competitors accept. Assess the payment providers that can help you accept these payments and evaluate factors like pricing, support, and flexibility.

To run a business with zero disruptions and legal conflicts, it’s paramount that you abide by laws and regulations.

Naturally, every country has its own unique local regulations regarding business. Before entering a new market, make sure you have an in-depth understanding of the regulatory environment in the foreign country. This will help you avoid legal pitfalls and stay on the right side of the law.

Some of the areas to research include local company laws on taxation, trade restrictions, employment regulations, and others.

Entering a new market in a foreign country alone can be one of your most challenging business moves.

To make this step smoother and less stressful, you can build strategic alliances with local firms or consider creating a joint venture. These strategic decisions will enable you to accelerate market entry and benefit from your partner company’s local know-how and resources.

Partnerships are often preferred in such situations as they enable businesses to share risk, exchange market insights, and take advantage of established and proven distribution networks.

Making a move towards a new market requires substantial financial resources, whether in the form of foreign direct investment or local loans.

Ensure you’ve explored your options for securing these resources, enabling you to fund your market entry strategy and cover operational expenses, advertising, and more. 

Where possible, think about using credit insurance as a risk mitigation technique.

Like growth in your local market, entering a foreign country requires specific goals and objectives. 

Based on your research and existing insights, create a straightforward implementation plan and don’t neglect the importance of timelines and critical milestones. This will help you stay on the right path to achieving your goals and guide you and your entire team.

Set deadlines for each milestone, even when it comes to things like market research and product development.

When entering a new market, you’ll inevitably face potential risks. Some of these may have been predicted, while other risks involved in the process can come as a surprise. 

For example, economic instability, regulatory changes, shifts in market demands, and others can all impact your market entry plan and affect your performance. 

By having a reliable risk management plan in place, you can respond adequately to risk. You’ll be prepared for the worst and best scenarios, allowing you to quickly take measures to tackle problems like currency fluctuations, unexpected competition, and more.

Even if you have built a popular and easily recognisable brand in your local business market, entering a new market means starting from scratch. 

Some of the strategies you used in the past may prove to work in the foreign market, while others may be completely unuseful. 

Use your market insights strategically to establish a consistent brand image. Where necessary, adapt your branding to meet the local requirements and resonate with local shoppers. 

Once you’ve created your brand value, protect it at all costs. Also, don’t forget that  brand loyalty  is crucial for your long-term success in a foreign market.

Next, consider how you will manage your sales processes and customer service.

Will you rely on internal team members to reach potential customers or handle inquiries, or would you instead rely on a local third-party agency? Will you need to hire local employees, or can experts from your local market help? What are some must-have digital tools for streamlining these processes and optimising results?

Think carefully about the specifics of your customer audience before implementing the right sales and customer service methods.

The previous point brings us to the next essential element – creating a team and hiring professionals. 

Acquiring the right talent, whether via local firms or hiring expatriates from your home country, guarantees efficiency and exceptional performance. Don’t neglect the importance of training and ongoing improvements to fit the local market’s needs, work based on local regulations, and achieve company goals. 

Get to know the hiring process in the new country and explore different hiring platforms from which you can benefit.

Your shift to a new market can be made much easier with the help of the right technology and IT infrastructure.

From CRM systems to cloud-based inventory management, these solutions can automate parts of your process, streamline operations, reduce costs, and eliminate the risks of manual errors. 

In some cases, you may need to merge your local systems with infrastructures from foreign markets. Assess your business needs in detail and plan to ensure you have the right resources and solutions at your fingertips when you need them.

Make sure you are familiar with any legal and compliance issues that may arise, like intellectual property rights, employment laws, trade regulations, and others. 

One of the best ways to ensure that you’re on the right path is to work with local legal experts who can guide every step of your business growth. They can help you navigate the regulatory environment, ensuring that you make decisions with the confidence that you are not breaking any rules along the way.

If you plan to expand your business into a foreign country – don’t worry – this step doesn’t have to be stressful and challenging.

With the correct information at your fingertips and a reliable strategy that you can count on, you can quickly start benefiting from the vast potential of a new market.

Frequently Asked Questions

How do i identify the best foreign market for my business.

You can find the best fit by performing market research to assess consumer behaviour, purchasing power, growth potential, and the competitive landscape. Also, analyse the legal and regulatory environment to ensure it aligns with your business structure and model.

How important is cultural understanding when entering a foreign market?

Cultural understanding is vital when entering a new market. It influences marketing, sales, customer service, and business interactions in general. Misunderstanding cultural norms and values can lead to ineffective communication and failed business efforts.

Can a small business afford to expand into a foreign market?

Small businesses can explore cost-effective market entry options such as exporting or licensing, which require less initial investment. Partnering with local distributors or using online platforms to reach international customers can also reduce costs.

Desi Tzoneva

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Invest 2035: the UK's modern industrial strategy

Updated 24 October 2024

© Crown copyright 2024

This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected] .

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This publication is available at https://www.gov.uk/government/consultations/invest-2035-the-uks-modern-industrial-strategy/invest-2035-the-uks-modern-industrial-strategy

Rachel Reeves, Chancellor of the Exchequer and Jonathan Reynolds, Secretary of State for Business and Trade:

Growth is the number one mission of this government. Our new industrial strategy is central to that growth mission.

This green paper sets out our vision for a modern industrial strategy – a credible, 10-year plan to deliver the certainty and stability businesses need to invest in the high growth sectors that will drive our growth mission.

There is rapid change in the global economy, and the case for governments to roll up their sleeves and shape markets rather than step back in the face of these challenges is stronger than ever. To capture the growth the UK so desperately needs, we need a modern industrial strategy to share in the next decade’s growth opportunities.

This industrial strategy will provide a launchpad for businesses. It provides the firm foundation for investment that businesses have told us they need. This government believes it is our role to provide the certainty that inspires confidence, allowing businesses to plan not just for the next year, but for the next 10 years and beyond.

We will not repeat the mistakes of the past, with policy changing as fast as decision-makers. To put an end to the policy merry-go-round, we are going to establish a statutory Industrial Strategy Council, hardwiring stability and long-termism into our plan from the start.

In its drive for growth, the industrial strategy will take advantage of the UK ’s unique strengths and untapped potential, enabling our already world-leading services and manufacturing sectors to adapt and grow, and seizing opportunities to lead in new and emerging sectors.

Jobs will be at the heart of our modern industrial strategy, supporting growth sectors to create high-quality, well-paid jobs across the country, backed by employment rights fit for a modern economy.

It plays to our strengths. Over the last 25 years, a third of our highest productivity industries were responsible for generating nearly two-thirds of our economy’s entire productivity growth [footnote 1] .

That is why our industrial strategy will channel support to 8 growth-driving sectors – those in which the UK excels today and will propel us tomorrow. They include the services and manufacturing industries that present the greatest opportunity for output and productivity growth over the long-term.

Our strategy is unreservedly pro-business, engaging on complex issues that are barriers to investment, like:

• recruitment of international talent
• research and development 
• technology adoption 
• access to finance 
• competition 
• regulation 
• energy prices 
• grid connections 
• infrastructure 

all through the lens of promoting investment.

It will be international from the start – learning and applying what works in other countries and deepening our multilateral and bilateral economic partnerships in support of growth and the growth-driving sectors.

This includes our trade strategy, renewing our commitment to free and open trade, where we’re forging a closer relationship with the European Union – ensuring smoother trade and simpler processes for doing business. But we are also striking new, market-opening trade deals with powerhouse economies across the globe. Our accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership ( CPTPP ) is just one example.

Most importantly, our industrial strategy will be driven by what business needs to succeed. 

That is what this green paper is for. An industrial strategy developed in a vacuum, detached from practical realities, is no strategy at all. It is essential that this strategy is informed by the experiences of the individuals, businesses, and local communities it will support.

We need the input of mayors and multinationals, councils and CEOs , trade unions, devolved governments, and experts to deliver prosperity through partnership. That is why we are asking for your input now to shape what will be a shared endeavour between private enterprise and public good.

We are enormously grateful for any time you can give to answering the questions in this green paper, so that we can be informed not by abstract concepts, but by experience and evidence. Your insights will be invaluable to creating an industrial strategy that cultivates the right pro-business, pro-worker environment for the UK to soar. And it is a strategy backed by a government that respects business, wants to partner with business, and is open for business. 

The industrial strategy, alongside sector plans for the growth-driving sectors, will be published in spring 2025, aligned with the multi-year spending review.

Executive summary

The new modern industrial strategy – Invest 2035 – is the UK government’s credible, 10-year plan to deliver the certainty and stability businesses need to invest in the high growth sectors that will drive our growth mission.

The strategy will focus on tackling barriers to growth in our highest potential growth-driving sectors and places, creating the right conditions for increased investment, high-quality jobs and ensuring tangible impact in communities right across the UK .

The strategy’s goal is to capture a greater share of internationally mobile investment in strategic sectors and spur domestic businesses to boost their investment and scale up their growth – an essential step in achieving sustainable, inclusive and resilient growth.

This green paper sets out the government’s approach and asks for your views and evidence to help develop a successful, modern industrial strategy to be launched in spring 2025.

The UK has major strengths to celebrate and build on, such as high-quality research institutions and innovative firms, its status as a global trading nation, a recognised set of regulatory and competition institutions, the pro-entrepreneurial environment, a highly skilled workforce, and investment opportunities across the country. But the UK also faces significant challenges.

The UK economy has faced significant shocks in recent years and has had a poor productivity record over the past decade and a half, consistently investing less than its international peers, and lagging on the performance of city regions outside London and the South East.

There is room for improvement in the adoption and diffusion of technology and ideas, as well as improving market dynamism. 

Our approach

The industrial strategy will be ambitious and targeted. Its primary objective is to drive growth, by taking advantage of the UK ’s unique strengths and untapped potential, enabling the UK ’s world-leading sectors to adapt and grow, and seizing opportunities to lead in new sectors, with high-quality, well-paid jobs. It will shape the type of growth being pursued. The government will also seek to support net zero, regional growth, and economic security and resilience. It will be grounded in long-term stability, a renewed commitment to free and fair trade, and a pro-business approach focused on reducing barriers to investment in the UK . 

Growth-driving sectors

The industrial strategy will focus on the sectors which offer the highest growth opportunity for the economy and business. Eight growth-driving sectors have been identified:

• advanced manufacturing
• clean energy industries
• creative industries
• digital and technologies
• financial services
• life sciences
• professional and business services

In the next stage of development of the industrial strategy, the government will prioritise subsectors within these broad sectors that meet our objectives and where there is evidence that policy can address barriers to growth.

Ambitious and targeted sector plans will be designed in partnership with business, devolved governments, regions, experts, and other stakeholders, through bespoke arrangements tailored to each sector.

Pro-business environment

Our industrial strategy will bring forward coordinated sector-specific and cross-cutting policies that support businesses to overcome barriers and invest. By considering and listening to businesses and experts, the government can identify the most effective levers for our sectors and geographical clusters across the country. These policy areas include:

• people and skills
• energy and infrastructure
• the regulatory environment
• crowding in investment
• international partnerships and trade

A core objective of the industrial strategy is unleashing the full potential of our cities and regions. The industrial strategy will concentrate efforts on places with the greatest potential for our growth sectors: city regions, high-potential clusters, and strategic industrial sites.

The government is committed to devolving significant powers to mayoral combined authorities across England, giving them the tools they need to grow their sectoral clusters and improve the local business environment through ambitious local growth plans.

Partnership with devolved governments will make this a UK -wide effort and support the considerable sectoral strengths of Scotland, Wales, and Northern Ireland.

Partnership

The ambitions set out in this document can only be realised in partnership.

The government will engage widely through the development of this strategy, engaging:

• trade unions
• local and devolved leaders
• international partners

A statutory, permanent, and independent Industrial Strategy Council will be established so that the strategy is informed by a broad and high-quality evidence base.

The industrial strategy and growth-driving sector plans will be published alongside the Spending Review in spring 2025.

The government wants to hear from you and collaborate on the development of this modern, ambitious industrial strategy.

The new, modern industrial strategy will be the government’s 10-year plan, with a primary objective of long-term sustainable growth in our highest potential growth-driving sectors – growth that is supportive of net zero, regional growth, and economic security and resilience. The strategy will be a significant driver of national renewal and a central pillar of the growth mission.

The UK has significant strengths

We should be clear about the UK ’s strengths, which create huge opportunities for stronger and better growth. Working in partnership with businesses [footnote 2] , the government will aim to establish the right economic conditions and remove the barriers to growth, creating a platform for economic renewal based on the UK ’s fundamental strengths.

• has high-quality research institutions and innovative firms; the UK produced 57% more academic publications than the US and 6 times more than China, in per head of population terms, in 2020, and is a world leader in field-weighted citation impact (FWCI) [footnote 3] , a benchmark for research quality [footnote 4]
• is one of the world’s largest trading countries, the second biggest services exporter in the world [footnote 5] , and one of the most globally connected economies in the world [footnote 6] , it has excellent international transport links, is the home of the global language for business, and is at the centre of the world’s time zones; the UK has established comparative advantages in parts of services sectors such as financial services and professional and business services, as well as in parts of growing goods sectors such as life sciences and advanced manufacturing [footnote 7]
• has a world-leading track record of decarbonisation; underpinned by the world-leading Climate Change Act, the UK was the first major economy to halve its emissions, cutting them by 50% between 1990 and 2022, while also growing the economy by 79% [footnote 8] and the Institute for Public Policy Research suggests that the UK is already world-leading in making 1 in 3 products vital to the net zero transition [footnote 9] ; there is evidence that clean technology specialisms are spread across the UK [footnote 10] ; the clean energy mission will enable the UK to achieve clean power by 2030 and accelerate the net zero transition across the economy
• has a strong pro-entrepreneurial environment, with several of the most successful start-up hubs in Europe [footnote 11] and the world’s third largest venture capital market [footnote 12]
• has a strong, diverse and highly-skilled workforce; fourth in Europe and seventh in the OECD for tertiary education [footnote 13] ; supported by an immigration system that attracts the brightest and best, with the UK being the second most attractive country in the G20 for young people [footnote 14]
• has a recognised set of regulatory and competition institutions; according to the Competition and Markets Authority ( CMA ) State of Competition report 2022 [footnote 15] , UK markets remain relatively competitive despite modest deterioration in performance over the last 2 decades
• has a global, urban powerhouse in London – our capital is a magnet for global talent and hosts Europe’s most competitive financial centre [footnote 16] , with long-standing expertise across the markets ecosystem from asset management to insurance and exchange markets, and in growing areas such as financial technologies (fintech) [footnote 17] and green finance [footnote 18]  
• leads Europe in attracting foreign direct investment ( FDI ) and is one of the top destinations for FDI stock in the world [footnote 19] ; recent FDI growth has been driven by a resurgence in digital investment, with the UK securing over a quarter (27%) of all European technology projects last year [footnote 20]

There is huge potential in our cities, regions, and nations, with sector strengths spread across the country. For example:

• city regions like Greater Manchester, West Yorkshire, and the West Midlands are burgeoning centres of modern industry
• Edinburgh hosts a major global financial centre with expertise in asset management, and approximately two-thirds of Financial Services sector employment is outside of London [footnote 21]
• Manchester, Leeds, Cardiff, and Belfast are home to diverse and successful creative industries clusters
• clean Energy industries are flourishing in Scotland, Wales, the North West, and the North East
• advanced manufacturing is thriving in South Yorkshire, the West of England, and beyond

However, the UK economy has faced a turbulent past decade and a half

In recent years, the UK economy has faced significant shocks, including the COVID-19 pandemic, high levels of economic uncertainty following the UK ’s exit from the European Union (which is estimated to have reduced investment by about 11% over the 3 years following the 2016 referendum relative to trend) [footnote 22] , [footnote 23] , and the energy price shock following Russia’s invasion of Ukraine. This followed the impact of the global financial crisis, subsequent slow economic recovery, and relative stagnation in household incomes.

The UK is recovering from an environment of global macroeconomic uncertainty and a cost-of-living crisis. These conditions have led to lower consumer spending, depressed business investment, and lower job security [footnote 24] . While the recovery has started, the economy still faces several challenges, including rising worker inactivity, and falling goods trade.

The fundamental and longer-term challenge is that the UK has experienced a slowdown in productivity growth over the last decade and a half, which is the ultimate driver of people’s living standards ( Figure 1 ). Although this productivity slowdown is not unique to the UK , it appears to have had a larger slowdown than many other advanced economies [footnote 25] . This has contributed to a period of exceptionally weak real wage growth, with average real wages only 0.5% higher in July 2024 than they were just before the global financial crisis in December 2007 [footnote 26] .

Figure 1: Output per hour worked, UK vs G7 countries, 1990 to 2023

This figure is a bar chart showing the output per hour worked across G7 countries from 1990 to 2023. The average output per hour worked in the UK has increased from just under $40 US dollars in 1990 to $60 US dollars in 2023.

Compared with the other G7 economies, the UK , as of 2023, had output per hour worked above that of Japan, Canada, and Italy. But had output per hour worked below that of France, Germany, and the United States. Over the 1990 to 2023 period, the UK has shown a greater increase in the output per hour worked than Japan, Canada, Italy, and France.

Source: OECD Productivity Database

These economic challenges have occurred against a backdrop of broader and longer-term trends in the UK and wider global economy. These include the opportunity presented from:

• our transition to net zero
• continuing geopolitical uncertainties
• the rapid development of artificial intelligence ( AI ), digitalisation, and increased automation
• changing patterns of demand and demographics

These trends will shape the UK ’s economic future, which means that government needs to help capture the benefits and mitigate the costs for the industrial strategy to be successful.

The causes of the UK ’s productivity weakness are structural, longstanding, and inter-related with a broad consensus that there is no single driving factor [footnote 27] . There are many drivers such as:

• macroeconomic conditions
• trade policy
• migration policy

These will be addressed within the growth mission more broadly, and other missions where relevant. The UK has closed productivity gaps before — and can do so again [footnote 28] . To that end, we have prioritised 4 central factors that the industrial strategy can particularly address:

Persistently low levels of investment

The UK has routinely ranked in the bottom 10% of OECD countries for overall investment intensity [footnote 29] . Since at least the 1990s, the UK has frequently had the lowest share of investment in gross domestic product ( GDP ) in the G7.

This weakness has primarily been driven by low levels of private sector investment, though public sector investment has tended to be relatively low by G7 standards as well [footnote 30] . Private sector investment varies significantly across industries, firm sizes, and regions [footnote 31] . Despite FDI being an economic strength, conversely UK business investment is weak, with around 40% of firms in any given year doing no investment at all [footnote 32] .

Major city regions

The UK ’s economic performance is skewed towards London and the South East, while other city regions have historically underperformed relative to both the national economy and their international counterparts [footnote 33] . Tackling this underperformance is key to raising economic growth and reducing inequality. For the 8 largest cities outside London combined, the gap between actual and potential productivity could be worth £47 billion [footnote 34] . With 69% of the UK population living in cities and their surrounding areas, reversing this underperformance can raise the living standards of millions [footnote 35] .

Weak diffusion and adoption of technologies, ideas, and processes

Better diffusion and adoption of both established and novel technologies, ideas, and processes is a critical part of how UK ’s ‘follower firms’ can improve their productivity. While the UK ranked fifth out of 133 countries in the World Intellectual Property Organisation ( WIPO ) 2024 global innovation index, it ranked only 31st in knowledge absorption [footnote 36] , [footnote 37] . In particular, UK firms lag in adoption of intermediate digital technologies. According to the World Digital Competitiveness Ranking, the UK ranked 20th out of 64 economies in 2023 [footnote 38] .

Slowing market dynamism

The UK has seen declining market dynamism [footnote 39] in recent decades. Market dynamism is the process by which markets increase the productivity of the overall economy by moving labour and capital from less productive firms to more productive ones over time. Historically, this has been the largest component of overall productivity growth, compared with innovation or efficiency improvements within firms [footnote 40] . The job creation rate was 2.6 percentage points lower in 2011 to 2019 compared with 2001 to 2007, and the job destruction rate 2.7 percentage points lower [footnote 41] .

The industrial strategy will need to increase market dynamism to allow labour and capital to flow more freely towards growth-driving sectors. However, economic change can create ‘losers’ as well as ‘winners’ – at least in the short term. Government needs to consider these impacts and provide the right transition mechanisms to ensure that people, places, and businesses are not left behind.

The rationale for an industrial strategy

The government’s growth mission will lead the way in delivering growth for all. Reforms are already underway to address planning barriers to growth, channel finance towards growth priorities, and accelerate the transition to net zero.

These will be supported by a modern industrial strategy which will implement targeted policy interventions [footnote 42] , to drive growth where the UK has, or could develop, a comparative advantage, or to unlock barriers essential for delivering long-term, sustainable, inclusive, and resilient growth.

There is a strong case for governments to more actively direct the structure of the economy, which is gaining traction across the world in the wake of things such as:

• major shocks and long-term trends, such as COVID-19
• re-orientated global supply chains
• the global productivity slowdown
• digital transformation
• climate change

The historic debate on industrial strategies has been characterised by advocates of extensive state planning on the one hand, and equally vehement supporters of the private market on the other.

While governments pursuing both approaches can point to some successes, through the experiences of countries around the world, a new perspective on industrial strategies has emerged in recent years that takes a more practical and pragmatic view.

This approach is one that seeks to place private business, entrepreneurship, and innovation at its heart, supported by governments playing a strategic and coordinating role beyond the fundamentals of upholding the rule of law and macroeconomic stability. It is an approach of partnership between government, businesses, and workers, working together to create the conditions for sustained and long-term growth across the economy.

The UK is no exception. Since the last industrial strategy in 2017 and the Plan for Growth in 2021, global shocks and trends, alongside stagnant UK output and productivity growth and persistent regional and income inequality, have strengthened the case for a more targeted approach.

As an open, mid-sized economy, there is a need to prioritise and target policy interventions carefully in areas that will deliver the largest growth benefit. Some government policies can make greater contributions to overall economic growth when they are focused on specific sectors, places, and types of economic activity. By improving the targeting of some cross-cutting policy levers [footnote 43] , governments can deliver better economic outcomes for the same inputs.

The government is also building the institutional capabilities necessary to set the foundations for long-term and agile policy implementation. Past industrial strategies have often not achieved their objectives because they have been too short lived – the UK has had around 10 industrial strategies, growth plans, or similar since 2011 [footnote 44] . This is why the government is going to establish a statutory and independent Industrial Strategy Council and new partnership structures to provide stability and ensure longevity.

Actively shaping and directing the economy in this targeted way means that the government has to choose what to do – and importantly what not to do. Even when governments do not have explicit industrial strategies, they still take decisions that impact specific sectors. An industrial strategy creates a framework for systematic prioritisation to maximise growth and broader benefits.

Targeting the industrial strategy

There are a variety of ways to approach industrial strategy. The government will take a deliberate and targeted approach towards growth-driving sectors and places, addressing barriers to growth. This should look across the economy, from services to manufacturing, from existing to emerging sectors.

The need for this type of approach is clear from the views of experts and businesses. Different sectors face different economic conditions and market failures, and hence different policy solutions. Each sector will also benefit from reforms to economy-wide policies, which can raise the overall productive capacity of the economy and help address market barriers and opportunities specific to a given sector [footnote 45] .

First, this approach to industrial strategy addresses the need in parts of the economy for temporary catalytic government support to scale up industries, particularly those with potential for global competitiveness. This catalytic support addresses:

• dynamic effects
• external economies of scale
• information failures

in emerging sectors and in capital-intensive industries, where high uncertainty can deter private investment [footnote 46] .

Government intervention can reduce uncertainty and support the development of critical sector-specific knowledge, and crowd in private capital to growth-driving sectors.

Second, this approach encourages competitive and innovative business ecosystems, particularly in industries with low market dynamism and high barriers to entry. It also identifies the importance of strong supply chain linkages between sectors, as supporting upstream sectors can enhance the productivity of downstream sectors.

By providing targeted support, government can foster competitive markets to improve efficiency and improve the performance of interconnected value chains, ultimately benefiting consumers through better prices, quality, and choice.

Third, this approach allows government intervention where markets are insufficiently coordinated, due to the need for simultaneous investments or complex value chains. Projects requiring extensive supplier networks or multiple production steps may necessitate government coordination through information sharing or facilitating stakeholder cooperation.

Finally, this approach allows targeted policy where certain economic activities or sectors produce positive or negative spillovers for the rest of the economy. This can lead to issues such as under-investment in new technologies where the direct – or private – benefits accruing to firms are lower than the collective benefits to society as a whole, for example, technologies which reduce carbon emissions. Or activity in one sector generates benefits for others, for example, knowledge spillovers. Government policy can address undesirable costs – internalise externalities – or stimulate activity to generate desirable benefits.

From a practical perspective, a targeted approach also helps in terms of building a partnership with business. Businesses organise, compete, and recognise themselves in terms of sectors – even if these do not always align with standard statistical definitions. Firms in these sectors are more likely to face similar barriers and opportunities to growth, making it easier to target them together.

Objectives for the industrial strategy

The industrial strategy is a central part of the growth mission. The purpose of the growth mission is to fix the foundations of the UK economy and to kickstart a decade of national renewal in order to drive growth and to deliver on the mandate to:

• rebuild Britain
• support good jobs
• unlock investment
• improve living standards across the country

This includes promoting productivity and growth in small businesses across our economy, particularly in supply chains across our growth-driving sectors.

In its drive for growth, the industrial strategy will shape the economy, taking advantage of the UK ’s unique strengths and untapped potential, enabling already world-leading industries to adapt and grow, and seizing opportunities to lead in new and emerging industries.

It is essential to consider the type of growth that the industrial strategy will deliver – growth that supports high-quality jobs and ensures that the benefits are shared across people, places, and generations. To that end, it will also support net zero, regional growth, and economic security and resilience.

The UK is committed to sustainable growth – growth that is aligned with our net zero and environmental objectives.

The UK approach will demonstrate global climate leadership, including focusing on supporting the clean energy mission. It will build a strong domestic industrial base across services and manufacturing to gain strategic economic advantage – creating good, well-paid jobs in the green sectors of today and of the future. This includes opportunities presented by the circular economy.

The net zero objectives for the industrial strategy will be to: 

• capture the growth opportunities of the clean energy mission and net zero transition
• identify and support clean energy industrial sectors with the greatest growth potential.
• align sector plans with net zero and environmental objectives

Regional growth

Higher national growth must involve unlocking the economic potential of the UK ’s cities and regions, by tailoring policy to specific place-based constraints and opportunities.

There are enormous growth opportunities in city regions and clusters across the UK . Businesses co-locate in specific clusters, with their own place-based opportunities and barriers to growth. The success of the industrial strategy’s growth driving sectors can only be achieved if these clusters reach their full potential, supported through a place-based approach to policy.

The regional growth objectives for the industrial strategy will be to: 

• unleash the potential of UK cities and regions, taking into account regional growth when considering growth-driving sectors
• consider where sectors and relevant capabilities are located to identify clusters that can drive growth

Economic security and resilience

Geopolitical shifts, COVID-19, and Russia’s invasion of Ukraine have exposed vulnerabilities and dependencies within the global trading environment.

Tackling these challenges and building a strong economy are complementary objectives – the UK ’s long-term growth needs to be secure and resilient, including by building a secure supply of critical goods. Building on the UK ’s existing strengths in areas such as life sciences, renewables and emerging technologies – for example AI – the UK can grow the economy and project strategic leadership at the forefront of geopolitical competition, while being better placed to respond to future shocks.

Our economic security objectives for the industrial strategy will be to:

• promote key sectors in the economy which drive growth and strengthen economic security
• reduce supply chain and other vulnerabilities in growth-driving sectors which could harm their long-term growth or ability to deliver critical outputs
• ensure national security risks inform the approach to driving growth in these sectors

Our industrial strategy, including our partnership with the Industrial Strategy Council, will help us think strategically about how we prioritise in support of these objectives. Decisions that government and business make in the short term will have lasting impacts, and there will be choices to make. Our industrial strategy will help us balance short- and long-term considerations to deliver growth that is sustainable, inclusive, and resilient.

Partnership with business, local leaders, and unions

National, regional, and local leaders understand the strengths and opportunities of their communities and know where business can thrive with the right support.

For those areas where responsibility is devolved to Scotland, Wales, and Northern Ireland, the government will respect devolved arrangements, while also working to ensure that the industrial strategy helps to cohere national efforts so that industrial policies work in concert.

To ensure collaboration and success, the government has established the Council of the Nations and Regions, led by the Prime Minister with the First Ministers of Scotland and Wales, the First and deputy First Minister of Northern Ireland, and mayors. The government will also partner on developing and delivering the industrial strategy with national and regional leaders through the Inter-Ministerial Group on Business and Industry and the Mayoral Council. 

The industrial strategy’s sector plans and business environment interventions will be designed and implemented in lockstep with local and devolved leaders. The strategy will give mayors in England the tools they need to grow their economies and develop ambitious 10-year Local Growth Plans. The government will work in partnership with the devolved governments to make this strategy a UK -wide effort.

Our approach – a modern industrial strategy

To maximise its impact on growth, the industrial strategy will focus on stimulating investment and activity in sectors with the highest growth potential. The top 30% of sectors ranked by productivity [footnote 47] in 1997 accounted for roughly 60% of all productivity growth from 1997 to 2022 [footnote 48] . Overall growth has slowed as our growth-driving sectors have slowed [footnote 49] . As set out in the objectives, the strategy will also target growth that is long-term, sustainable, inclusive, and resilient.

Based on this, 8 growth-driving sectors will be prioritised across services and manufacturing, based on both existing and emerging strengths:

In the next stage of development of the industrial strategy, the government will identify subsectors within these broad sectors that meet our objectives and for which there is evidence that policy can address barriers to growth. This includes their contribution to net zero, regional growth, and economic security and resilience. It includes an assessment of the capabilities that government should build on and the barriers and market failures that government should address. The government will use the responses to this green paper to inform this programme of analysis.

The industrial strategy will build from the UK ’s current sectoral strengths. Path dependency is critical – few sectors have moved from below average productivity in 1997 to above average productivity in 2022 and vice versa ( Figure 2 ). Therefore, the industrial strategy should focus on innovating and capturing opportunities in those sectors where we have strengths and capabilities, or where there is evidence that these can be built.

Figure 2: Output per hour worked, 1997 vs 2022, £, current prices, log scale

This figure is a scatter plot which compares the output per hour worked in different sectors in 1997 to 2022. It shows a positive correlation between sectoral productivity rates in 1997 and 2022.

Sectors such as insurance and pharmaceutical manufacturing had high levels of productivity in 1997 and 2022 as opposed to sectors such as food and beverages which have had lower.

Source: Office for National Statistics (2023) Output per Hour Worked, UK

The UK has strengths within services and manufacturing. The UK is the second biggest services exporter in the world [footnote 50] , with established advantages in financial services, creative industries, and other business services. The UK has also revealed comparative advantage in growing advanced manufacturing markets, such as pharmaceuticals and aerospace [footnote 51] ( Figure 3 ).

Figure 3: Sector analysis of UK revealed comparative advantage

10-year annualised growth in global export value, by product category: 2019 [footnote 52]

This figure plots the UK ’s revealed comparative advantage in various goods and services categories in 2019 against growth in global export value over the previous decade. The size of the bubble denotes the product’s share in total global trade.

The chart shows that in service exports, the UK ’s revealed comparative advantage is especially high in financial services, insurance and pensions, and other business services. Whereas there are a number of large and growing goods areas where the UK clearly does not have advantages such as electrical machinery and equipment and vehicles.

Source: Resolution Foundation (2023) Analysis of Harvard Growth Lab, Atlas of Economic Complexity (HS version) and Organisation for Economic Cooperation and Development-WTO, Balanced Trade in Services

The UK also has emerging strengths in new technologies, systems, and processes. The UK ’s strengths in research and development, innovation, and skills mean that it is well placed to capitalise upon emerging technologies, processes, and ideas. For example, the UK has existing specialisms in over a third of technologies needed for net zero, such as environmental monitoring technologies and carbon capture, utilisation and storage ( CCUS ) [footnote 53] , [footnote 54] , [footnote 55] . Interventions in emerging technologies may differ to those for existing sectors, for example, focusing more on helping firms to commercialise innovations, scale up, and access finance.

Methodology

The government has undertaken initial analysis to help determine the 8 growth-driving sectors. This is set out at high level in this section. Future work will build on this analysis to determine the key subsectors within these broad sectors, using evidence collected from this green paper as well as further evidence-gathering and use of wider methodologies.

There is no single agreed analytical methodology to identify highest growth potential sectors due to longstanding measurement challenges, such as data quality and sector definitions, and the inherent uncertainty around economic growth [footnote 56] . Any sector is broad and heterogeneous, comprising a range of varied subsectors, some of which have greater growth opportunities than others. Therefore, identifying sectors which meet the industrial strategy’s objectives must be based a combination of evidence and judgements, including deciding which metrics, data, and methodologies to use.

This initial analysis considers the different characteristics and needs of existing and emerging sectors in order to identify:

• current strengths: the UK ’s highest productivity and most internationally competitive sectors and key drivers of growth within the economy
• forecast growth
• the future importance of the sector
• the UK ’s global position now and in the future

It uses a multi-indicator assessment to identify UK subsector strengths:

• output growth: the size and growth rate of the subsector
• productivity: to see where opportunities are to boost national productivity
• international position: to see where the UK is, or could be, good, relative to other countries, including comparative advantage in tradeable sectors

This approach was used to identify potential growth subsectors in existing sectors. Initial analysis was conducted at the SIC -2 level – or equivalent – because less granular data is too aggregated to identify strengths. This selection of subsectors should be regarded as indicative and not the final key subsectors, as further analysis will be conducted.

Where necessary, different metrics were used for emerging subsectors and technologies, as these are less well captured by traditional SIC sector data [footnote 57] . Measuring emerging technologies is also challenging as they are not linear and predictable, and they interact with each other. To mitigate data challenges, evidence was triangulated from academic evidence, market intelligence, industry reports, and relevant datasets.

These subsectors were then aggregated to identify the 8 growth-driving sectors:

In the next stage of development of the industrial strategy, the government will design ambitious and targeted sector plans for each of the 8 growth-driving sectors in partnership with business, devolved governments, regions, experts, and other stakeholders, through bespoke arrangements tailored to each sector.

To do this, the government will prioritise subsectors within these 8 broad sectors that meet its objectives and where there is evidence that policy can address barriers to growth. We will also consider the overlap and interdependencies across the growth-driving sectors.

The sector plans will also include policies for those subsectors on which the growth-driving sectors have critical dependencies. To that end, value chain analysis is being progressed to identify subsectors within:

• foundational sectors: these are the sectors which provide critical inputs and infrastructure to our growth-driving sectors
• technologies: these are the technologies which are a critical or emerging part of a growth-driving sector’s value chain

1) How should the UK government identify the most important subsectors for delivering our objectives?

2) How should the UK government account for emerging sectors and technologies for which conventional data sources are less appropriate?

3) How should the UK government incorporate foundational sectors and value chains into this analysis?

Our growth-driving sectors

For each of the growth-driving sectors, we set out how they link to the industrial strategy objectives, their strengths, and outline where government can – in partnership with business and others – go further to support growth. As we have not yet prioritised the key subsectors, these descriptions are illustrated using indicative examples of subsectors and policy interventions.

Advanced manufacturing

Manufacturing spreads opportunity across the country, delivering high-value jobs attracting a higher-than-average hourly wage [footnote 58] . The majority of manufacturing jobs lie outside of London and the South East, 84% compared with 69% for the economy as a whole [footnote 59] .

Our industrial base plays an important role in our future economic resilience, as a significant dependency for many of our services sectors and as a driver of innovation. It is also critical to achieving the clean energy mission, which will bring opportunities for the sector. It is estimated that additional capital investment averaging £50 to £60 billion per year is needed through the late 2020s and 2030s, across the whole economy [footnote 60] .

UK manufacturers produce many of the essential goods, parts, and components needed to sustain and protect citizens in the UK and across the world.

The UK ’s manufacturing strengths are broad and built on our world-class innovation expertise. For example, up to 56 gigawatt hours ( GWh ) of electric vehicle battery capacity is planned for the UK so far, and the UK is on its way to reaching the 2030 capacity requirements expected by the sector [footnote 61] , helping it to remain a globally competitive investment destination. The South West and Wales has one of the largest aerospace clusters in the world, producing around half of the world’s large civil aircraft wings. The UK manufacturing supply chain is world-renowned for its specialist strengths in high-quality and innovative products.

The UK is entering a major investment cycle, where the net zero and digital transformations present considerable opportunities for UK manufacturing investment. However, many countries offer sizable subsidies and incentives to secure this internationally mobile investment. To compete, government will need to ensure that the UK has a competitive offer across all the factors that influence investment, removing barriers and building on UK strengths, including:

• world-class network of universities
• research institutions
• deep venture capital pool
• trade openness 

Clean energy industries

Clean energy industries are a major driver of global growth. Over 90% of global GDP is now covered by net zero targets [footnote 62] . There is rapid growth in global demand for low-carbon products, with McKinsey estimating a global market opportunity of £1 trillion for British businesses in the period to 2030 [footnote 63] . An additional £50 to £60 billion of capital investment will be required each year through the late 2020s and 2030s to achieve our net zero ambitions [footnote 64] – it will be money well spent, as the ‘size of the prize’ is significant. An International Monetary Fund ( IMF ) study suggested that growth multipliers associated with clean energy investment (1.1 to 1.5) are larger than those associated with fossil fuels [footnote 65] .

The UK is well placed to capture these opportunities – the industrial strategy and the clean energy mission will help drive the UK towards becoming a clean energy superpower. The UK has a comparative advantage in established and emerging clean energy industries, and a developed services sector [footnote 66] , [footnote 67] . Our support has already delivered significant clean investment into the UK , including Sumitomo Electric’s recent commitment to a subsea cable manufacturing plant at the Port of Nigg, Scotland, which will bring over £350 million in investment [footnote 68] .

While we have successfully delivered some of the largest clean energy infrastructure projects in the world, we can go further. Barriers often cited include:

• high capital investment requirements
• significant international competition
• skills shortages

More can be done to build the resilient supply chains and manufacturing base to secure the jobs that accompany them.

Germany has almost twice as many renewable jobs per head of population as the UK , Sweden almost 3 times and Denmark almost 4 times as many [footnote 69] . With the right policy, the government can stimulate investment to grow the clean energy industries to deliver across all areas of the country – including in the UK ’s industrial heartlands.

The Climate Change Committee estimates that by 2030, up to 725,000 jobs could be created in low carbon sectors [footnote 70] and that moving to clean homegrown sources of electricity will reduce the UK ’s dependence on volatile fossil fuel imports, improving energy security and helping to protect billpayers from rising and volatile energy prices.

Creative industries

The UK ’s creative industries are world-leading, showcasing the best of its creativity and culture to the world. According to UN Trade and Development, the UK is the third largest creative services exporter behind the US and Ireland, worth $87 billion in 2022 [footnote 71] . Globally, 1 in 10 songs streamed are from the UK [footnote 72] . The UK is a global centre for screen production, with £4.23 billion in production spend in 2023, of which 78% was from inward investment [footnote 73] . According to the Creative Industries Policy and Evidence Centre, the creative industries accounted for 67% of the UK ’s digital exports in 2021 [footnote 74] .

The sector is expected to grow worldwide, creating further growth opportunities. The sector is highly innovative, attracting significant inward investment and producing goods and services that are world renowned. PwC estimates that the global entertainment and media sector will grow to $3.4 trillion by 2028 [footnote 75] . Half of global trade is expected to be digital by 2050 [footnote 76] . 

To enable growth in the sector, the government will leverage UK creative industries’ global comparative advantages by unlocking private investment, boosting exports, and developing its highly skilled workforce. The government needs to ensure that the UK sector remains globally competitive as a home for world class talent while maximising access to important markets to tour and collaborate. The sector plays an important role in driving growth across regions and nations, through creative clusters and corridors across the country that spread opportunity and prosperity in communities, as well as driving growth by enhancing access to skills, spillovers, and knowledge sharing.

The UK ’s defence sector is a global leader. The government will set out the pathway to spending 2.5% of GDP on defence. Defence and national security are foundational for economic growth across the UK and the defence sector provides good, well-paid jobs.

Government defence spending supports around 434,000 jobs across the UK , equivalent to 1 in 60 UK jobs [footnote 77] . The majority (67%) of defence spend with UK industry and commerce goes outside of London and the South East [footnote 78] , with local areas benefitting from defence exports. Defence drives innovation through investment in research and development, including developing and applying new technologies such as AI , quantum, and space capabilities, which drive positive spillovers across the economy.

Alongside the UK ’s significant defence budget – at £53.9 billion, with £25 billion of that spent with the UK industry and commerce on a range of key industrial capabilities [footnote 79] – the UK is an exporter of leading defence capabilities to its allies and partners. However, with threats increasing, the government needs to address issues that inhibit or prevent growth in the defence sector. There has been a lack of UK government strategy on its defence industrial base in recent years. The defence industrial strategy will ensure that the government can improve the UK ’s performance on defence exports and get more defence output for every defence pound spent.

The government’s manifesto committed to “bringing forward a defence industrial strategy aligning our security and economic priorities”. This will be commissioned by the Secretary of State for Defence and will be the sector plan for defence in the industrial strategy.

Defence industrial strategy will make sure the imperatives of national security and a high-growth economy are aligned. Strengthening the UK ’s defence sector will boost the prosperity of its people. With a better, more innovative and more resilient defence sector, the UK can innovate at speed to help Ukraine:

• defeat Russia and restock its Armed Forces
• deter its adversaries
• seize opportunities presented by the technologies of the future
• create new partnerships and promote defence exports

Digital and technologies

The economy is fundamentally different to where it was a decade ago, transformed by digital sectors and increasingly by advances in AI and other technologies. This sector is at the forefront of geopolitical competition, so developing its strengths can enhance the UK ’s security and prosperity.

In 10 years, the economy will be radically different again. Digital and technology businesses have been responsible for transformative shifts in productivity in recent years. Strategic technologies that industry can point to now will be disrupting existing sectors and markets, and creating entirely new ones with high growth potential. The most valuable businesses in the world are digital and technology companies – 8 of the top 10 by market capitalisation [footnote 80] .

The UK already has a strong story to tell, as only the third country in the world (alongside the US and China) to have a tech ecosystem valued at over $1 trillion. Our track record in creating over $1 billion start-ups – over 165 to date and the highest in Europe – continues to attract investors [footnote 81] . In 2023, UK start-ups raised the most venture capital in Europe – more than France and Germany combined (who hold second and third place, respectively) – making the UK the third largest tech ecosystem globally by investment [footnote 82] .

To deliver growth in this sector, the government will focus on a range of technologies and their commercialisation, with a portfolio approach that backs smaller, less proven, and more disruptive businesses alongside larger, well-established businesses in existing sectors.

With its world-leading research, strong culture of innovation, and thriving start-up ecosystem, backed by a deep talent pool and the investment required to grow and scale sustainable businesses globally, the UK is well positioned to build on its success and develop the next wave of groundbreaking digital and technology companies.

Financial services

The UK ’s financial services sector is one of its greatest assets as an economy. The international nature of the sector means it could attract global investment and take advantage of the potential of a new decade. The sector is also unique in driving growth through providing growing businesses with the finance they need to expand, supporting consumers with mortgages, and driving capital into productive investment.

The sector will play a core role in providing the tens of billions needed to finance the net zero transition [footnote 83] alongside providing thousands of jobs in every region of the UK , with emerging hubs in Belfast, Leeds, Cardiff, and Glasgow, and a global centre in Edinburgh, driving regional growth.

The UK ’s financial services sector has a unique, core role to play in delivering growth across the whole economy. Along with the US, the UK is 1 of 2 truly global financial centres – a vibrant hub, employment rich and export focused. London, Edinburgh and Glasgow all rank within the top 40 most competitive, globally significant financial centres [footnote 84] . The financial services sector also has significant export potential, with 41% of the firms headquartered within the UK in 2019 having operations outside of the country [footnote 85] .

The UK is also home to fast-growing, new areas such as fintech and sustainable finance. London is ranked top in the Global Green Finance Index [footnote 86] and the 2021 Kalifa Review noted that the UK accounts for around 10% of global market share for fintech, with revenues forecast to more than triple between 2020 and 2030 – assuming that this market share is maintained. [footnote 87]

The government will:

• partner with the financial services sector to pivot to export to new and growing markets
• make the UK the location of choice for green business to finance the net zero transition
• take advantage of trends in digitalisation, to attract the firms of the future and increase productivity across the economy

Life sciences

Over the next decade, the life sciences sector holds enormous potential to drive economic growth and productivity while significantly improving health outcomes for thousands of patients across the country. This sector delivers goods that are critical to the functioning of our economy and society and increases the UK ’s resilience, for example, to epidemics. Recent breakthroughs, such as the development of promising new vaccines targeting cancer, underscore the transformative impact of the sector. The UK ’s life sciences sector offers unparalleled opportunities for future economic growth, propelled by:

• new discoveries
• data availability
• groundbreaking treatments
• personalised healthcare
• innovative manufacturing processes

Crucially, the UK ’s life sciences sector is built on a strong foundation, with over 6,800 businesses in 2021 to 2022 that generated over £100 billion in turnover [footnote 88] . The UK is also home to 4 of the top 10 global universities for life sciences and medicine, and with the expertise of the NHS, the UK is a global hub for innovation [footnote 89] .

There is an opportunity to renew the UK ’s leadership in life sciences, strengthening and supporting the areas where the UK is already effective alongside bold innovation and collective partnership, with business, academia, and the health system to drive economic growth and build an NHS fit for the future.

The sector sits at the intersection of healthcare innovation and cutting-edge technologies offering immense potential to transform public health, enabling people to live longer and healthier lives, and boosting productivity, while driving high-value job creation and attracting significant investment.

Professional and business services

The UK ’s professional and business services operates with a comparative advantage in a market with global demand of $1.9 trillion [footnote 90] . Through provision of essential business sectors and trusted business advisers, it is also an enabler of growth across the economy, helping businesses to raise finance, scale up, export, and invest.

The UK ’s professional and business services sector has a global reputation for quality and innovation, with its expertise, qualifications and standards used worldwide, underpinned by our world-renowned institutions and legal system.

The bulk of sector performance is driven by a relatively small number of firms, mainly concentrated in London and the South East. There are clear opportunities to raise the performance of the sector as a whole, both at national and local level, by improving sector productivity.

Opportunities cited by business include:

• improving management skills
• exploring the use of data and AI
• expanding into overseas markets
• exploiting new opportunities in supporting the climate transition and digital transformation of clients

The government, with industry, will also look to expand the global market for the UK ’s professional and business services, for example, by:

• capitalising on emerging strengths in accounting and law-tech
• promoting the UK ’s regional professional and business services strengths overseas
• unlocking barriers to trade in services

4) What are the most important subsectors and technologies that the UK government should focus on and why?

5) What are the UK ’s strengths and capabilities in these subsectors?

6) What are the key enablers and barriers to growth in these subsectors and how could the UK government address them?

Creating a pro-business environment

The government will work in partnership with businesses, trade unions, mayors, devolved governments, experts, and other stakeholders to help address the biggest challenges to unlocking business investment, focusing on the 8 growth-driving sectors and clusters across the country.

The industrial strategy and its sector plans will explain how government will help address those challenges when published in spring 2025, having been designed in partnership with stakeholders, through bespoke arrangements tailored to each sector.

We welcome views on the questions set out in this green paper, which forms an important part of this engagement.

Based on initial feedback from businesses and cross-economy business intelligence [footnote 91] , there are several policy areas that are important for growth-driving sectors and the pro-business environment:

• regulatory environment

The industrial strategy will consider the effectiveness of both cross-cutting polices and targeted solutions, for growth driving sectors. In doing so, the industrial strategy will help ensure a pro-business environment, as set out in the government’s manifesto.

To support that policy development, and to underpin a robust monitoring and evaluation framework, the government is developing a theory of change for the industrial strategy (see Annex - theory of change ).

Addressing sector-specific and cross-cutting challenges together will underpin long-term growth, helping overcome coordination issues that have hindered past strategies [footnote 92] , [footnote 93] .

The industrial strategy will be a central pillar of the growth mission, through which the government is working to fix the foundations of the economy and to kickstart a decade of national renewal. The industrial strategy will also complement and benefit other priorities, such as the clean energy and opportunity missions. At the same time, those missions will also support the industrial strategy.

7) What are the most significant barriers to investment? Do they vary across the growth-driving sectors? What evidence can you share to illustrate this?

To develop the industrial strategy, the government is prepared to tackle the issues head on and listen to the needs of business. The aim is to provide the certainty and simplicity for businesses to confidently invest in the UK . To do this, government policy will be guided by 4 principles:

• building long-term stability
• using the power of strategic government
• a commitment to free and fair trade
• easing the investor journey

Principles for the industrial strategy

Building long-term stability.

The government will not repeat the mistakes of the past. Too often, the impact of industrial strategies has been concentrated in certain regions and not shared across communities. Businesses say that past plans have been short-lived and often been felt as being done to rather than with them. 

To succeed, all of government will need to work in unison, with every action taken considering how to spur investment and growth. The industrial strategy will be developed and delivered in partnership with business, unions, local and devolved governments, experts, and other stakeholders, working as one to identify barriers to investment, build long-term confidence, and kick-start growth. As part of this, the government will promote stable regulatory frameworks to give businesses the certainty they need to invest.

Renewing commitment to free and fair trade

The government will ensure that the industrial strategy is international from the start and aligned with the trade strategy, to attract quality investment from abroad and expand markets for the growth-driving sectors, as well as across the wider economy.

The coming year is critical for going further with trading and wider economic relationships. Firstly, the government will build on the UK ’s trade and investment relationship with the EU , with strengthened cooperation in areas such as the economy, energy, security, and resilience.

The government will also seek economic partnership opportunities internationally to build future markets, address shared challenges, and respond to the risks and opportunities of the changing geopolitical context.

Easing the investor journey

The government will ensure that the industrial strategy is pro-business and focused on reducing barriers to investment in the UK . To do this, policy must make it simpler and cheaper for companies to scale up and invest in the UK . 

The first steps in a fundamental shift towards backing growth have already been taken, including through planning reform announced in the summer. The government will focus its efforts on carrying this reform through to policy change, having heard the feedback from businesses that it must go further. The industrial strategy will consider how the government can address issues that are critical for driving investment such as skills, recruitment of international talent, data, innovation, technology adoption and diffusion, business finance, competition, regulation, energy prices, grid connections, planning, and infrastructure.

Being a strategic, growth-focused state 

The government is committed to using the power of the state strategically to support and shape the UK ’s economy and future growth. Through the industrial strategy, the government will harness the UK ’s strengths to create an economy that produces high yields for investors and highly paid jobs for working people.

For the industrial strategy to have the greatest impact, the government must be clear-eyed about the sectors which offer the highest growth opportunity for the economy and businesses, including where the UK has existing and emerging strengths. The government will also seek to foster a more dynamic scale-up environment offering high returns. The UK can compete on quality and generate high growth, in the services, technologies and supply chains of the future.

People and skills

The people that create and work in businesses will be central to the success of the growth-driving sectors and clusters, supporting the government’s growth, opportunity, and clean energy missions in particular. Workforce skills are a key area raised by businesses, for example, with Deloitte’s CFO survey highlighting it as an area that government should prioritise [footnote 94] .

Ensuring the UK has a healthy population whose skills meet the needs of employers will bring people into the labour market and support their shift into high-skilled, high-wage jobs. The Office for Budget Responsibility ( OBR ) estimates that improving health outcomes among the working-age population, by reducing incidence of work-limiting ill-health by a quarter, would increase the size of the economy by 0.8% over the longer-term [footnote 95] . Skilled workers are more productive, drive innovation, and facilitate the adoption of new technology – ultimately boosting growth [footnote 96] .

Around a third of average annual UK productivity growth was attributable to an expansion of skills available in the workforce between 2001 and 2019 [footnote 97] .

While the UK has many strengths, including first-class universities and a relatively flexible labour market, alongside employers the government needs to address several barriers raised by businesses.

The UK has a skills mismatch greater than many peer economies [footnote 98] , with 10% of businesses reporting at least one skill shortage vacancy [footnote 99] . The UK has a lack of technical skills – such as in electrical, mechanical and welding trades, key to the advanced manufacturing and clean energy industries – as well as basic skills in English and maths [footnote 100] , [footnote 101] .

What employers need will vary according to their sector and geography, and the skills system must be more flexible and address those disparities [footnote 102] . For example, the creative industries sector, which is clustered across the UK , has reported needing workers with skills in digital, design and data.

There are weaknesses in management and leadership skills, particularly in small businesses [footnote 103] . Workforce participation is falling and employer investment in skills lags behind many comparator countries, with UK employers investing half as much per employee than the EU average [footnote 104] , [footnote 105] .

With over 80% of the 2030 workforce already in work [footnote 106] , the government needs to address the impact that changing technologies and demographics will have on skills needs and job numbers in the growth-driving sectors. These barriers will require targeted interventions across different sectors and places.

Government has already taken steps to tackle some of these issues, including by establishing Skills England, which will improve the skills system so that it is simpler, more data driven, and responsive.

The government will transform job centres into a national jobs and careers service that will help employers find the talent they need.

The new growth and skills levy, which replaces the existing apprenticeships levy, will enable employers to access a broader range of high-quality training offers. Skills England will play a crucial role in determining which training will be eligible for the expanded levy, in line with its assessment of skills needs and future demand, and through extensive engagement with its partners in the skills system.

To improve coordination for investors, the Office for Investment and Skills England will implement a skills triage service, providing bespoke guidance for strategically important investments.

8) Where you identified barriers in response to question 7 which relate to people and skills (including issues such as delivery of employment support, careers, and skills provision), what UK government policy solutions could best address these?

9) What more could be done to achieve a step change in employer investment in training in the growth-driving sectors?

Accelerating the rate of innovation and increasing the adoption and diffusion of those ideas, technologies, and processes is an essential step for growing the productivity of our growth-driving sectors. This must include ensuring that data is created, handled, and shared in a way that both unlocks economic opportunities and is safe and ethical across the economy.

The UK ’s innovation system needs to operate holistically to achieve the ambitions of its industrial strategy.

Research, development, and innovation

Research, development, and innovation ( RDI ) are essential to developing the UK ’s growth-driving sectors. The UK has a world-class research base, with 4 of the world’s top 10 universities [footnote 107] , which include specialisms in many of the growth-driving sectors, such as life sciences. UK universities also create globally competitive spinout companies, which raised £1.66 billion in equity funding in 2023 [footnote 108] , 9.5% of all equity funding raised by UK companies, and are second only to the US in total investment in spinouts [footnote 109] . The UK has considerable strengths in RDI , however, we can struggle to translate these into commercial goods and services domestically.

The UK would experience significant productivity gains if we improved the adoption and diffusion, particularly beyond our frontier firms, as shown in Figure 4 . The UK ranked fifth out of 133 countries in the WIPO 2024 global innovation index but only 31st in knowledge absorption [footnote 110] . The proportion of UK firms adopting a range of intermediate digital technologies is significantly below OECD leaders [footnote 111] and UK SMEs were ranked sixth in the G7 on technology adoption [footnote 112] , [footnote 113] .

Figure 4: Contribution to UK labour productivity growth, 1998 to 2021

Average annual contribution to growth in output per job, non-financial business economy.

This figure is a bar chart showing the different contributors to UK labour productivity growth across laggard, middle, and frontier firms. The figure uses multiple year ranges and plots the average labour productivity growth within these years.

Frontier firms are defined as the top 10% weighted by employment, laggard firms the bottom 50% weighted by employment and middle firms the remainder.

The chart shows that the average labour productivity growth was stronger in 1998 to 2007 than in 2011 to 2019, though the UK more recently saw stronger growth in 2020 to 2021 than in both earlier periods.

The main contributor to this growth has primarily been from frontier firms between 1998 to 2007 and 2011 to 2019. During 1998 to 2007 middle firms also made a substantial contribution to productivity growth. But during 2011 to 2019 their contribution dropped sharply.

The contribution of both frontier firms and middle firms has increased since 2020, but this is likely distorted by the effects of the COVID-19 crisis.

Source: Office for National Statistics (2023) Trends in UK Business Dynamism and Productivity

There are a range of barriers to increasing RDI and adoption and diffusion (including access to finance, skills, and regulation) which vary widely by firm sector, size, and region, requiring tailored policy solutions [footnote 114] . The UK has successful policies such as the Made Smarter programme, which supports adoption in the manufacturing sector, and the Innovate UK Catapult network, which supports the commercialisation of RDI in areas closely aligned to several growth-driving sectors.

We have many strengths from which to build, for example, the Ventilator Challenge led by the High Value Manufacturing Catapult in 2020, which combined the knowledge and skills of 33 UK technology and engineering businesses to deliver 13,437 ventilators to the NHS in response to the anticipated escalation in COVID-19 cases, implementing an end-to-end supply chain in 1.5 weeks [footnote 115] .

There is further to go.

The newly established Skills England will help ensure that the domestic workforce has technical skills needed for businesses to make the best use of technology.

The AI Opportunities Action Plan, led by Matt Clifford, technology entrepreneur and Chair of the Advanced Research and Invention Agency (ARIA), will propose an ambitious approach to grow the AI sector and drive responsible adoption across the economy.

The Department for Business and Trade (DBT)’s Global Talent Network and Global Entrepreneurs Programme will ensure the UK is the best place in the world for scientists, innovators, and entrepreneurs to live and work.

10) Where you identified barriers in response to question 7 which relate to RDI and technology adoption and diffusion, what UK government policy solutions could best address these?

11) What are the barriers to R&D commercialisation that the UK government should be considering?

Data in the industrial strategy

Data fuels modern business, both as users and producers. There is a huge opportunity for the UK to use its data more strategically, driving innovation and economic growth, including in the growth-driving sectors. It has been estimated that data has the potential to contribute to UK productivity growth by between 0.23% to 1.26% per year [footnote 116] , but the UK is currently on the lower end of this range, and further productivity growth gains require greater data maturity [footnote 117] .

Data-specialised businesses are a growing part of the economy, increasing their share of GDP from 6.5% to 7.4% between 2021 and 2023 [footnote 118] . At 7.4% of GDP , the UK data economy is larger as a fraction of the total economy than any European country except Estonia [footnote 119] . However, of businesses that handle digitised data:

• only 21% analysed their data to generate new insights and knowledge
• only 2% used their data for AI or automated decision-making [footnote 120]

The transformative power of data comes through investment in creating, combining, and building capability to use high-quality data from different sources.

Collaboration between the public sector, businesses, and researchers is critical to maximising the benefits of data for the economy. Ensuring public trust, security, and international data arrangements will always be at the heart of this. The industrial strategy could include:

• using public sector data as a driver of growth, including the proposed National Data Library, so that prioritised public data assets – for example from transport to environmental data – are an essential part of the UK ’s broader, forward-looking approach to data access, with better use of public data economy-wide while ensuring citizens’ data are protected
• empowering individuals and businesses with their data – new smart data schemes can provide secure sharing of a customer’s data upon their request, with authorised third-party providers; these can drive innovation in and between sectors, such as open banking in the finance sector
• improving data maturity in businesses to help businesses to do more with data, both as users and producers – this includes improving competition in data-driven markets, and collaborative government and private sector arrangements on consistent standards, data-sharing infrastructure, and supporting businesses in the way data is used across supply chains

12) How can the UK government best use data to support the delivery of the industrial strategy?

13) What challenges or barriers to sharing or accessing data could the UK government remove to help improve business operations and decision-making?

Energy and infrastructure

Infrastructure underpins all economic activity by connecting people, goods, services, energy, and ideas. Improvements in infrastructure will be foundational to success across our growth-driving sectors and to addressing place-specific constraints to growth in city regions and sectoral clusters.

Planning, infrastructure, and transport

An effective planning system is a fundamental enabler for business investment in our growth-driving sectors.

At the national and regional level, planning constraints hold back growth, including in high-performing life sciences clusters like Cambridge [footnote 121] and clean energy industries hubs such as Tees Valley and the North East.

Firms require predictability and efficiency when applying for consent for projects, but this is not being provided by existing processes. Businesses have told us that the planning consent process is too lengthy and uncertain. Infrastructure projects spend an average of 65 months in pre-construction phases, the highest among peer countries [footnote 122] .

Growth-driving sectors also require high-quality infrastructure and transport connectivity. A resilient, safe, and secure transport network provides access to social and economic opportunity, and is fundamental to business investment and location decisions. A lack of infrastructure is holding back the growth of major city regions such as Manchester, where lack of transport is estimated to cause a productivity gap of £8.8 billion each year [footnote 123] .

Targeted, long-term infrastructure investment is a vital catalyst to the success and stability of major city regions and clusters of our growth-driving sectors. Businesses agree that the UK has for too long failed to provide a long-term vision and clear statement of intent to support this [footnote 124] , [footnote 125] , [footnote 126] , [footnote 127] .

A lack of housing in some places across the UK also prevents labour markets from operating effectively and prevents successful agglomerations.

Further, additional data centre capacity and access to fast, secure, and reliable digital connectivity is essential to enabling economic growth and to reap the transformational productivity benefits of digitalisation and the adoption of AI . Continued investment is needed to meet our ambitious targets to bring gigabit-capable broadband to all of the UK , and standalone 5G to all populated areas, by 2030.

As a key priority of the growth mission, the government has made significant planning, transport, and infrastructure policy announcements. In July 2024, the Chancellor of the Exchequer announced plans to update relevant National Policy Statements within 12 months. In the same month, the Planning and Infrastructure Bill was announced in the King’s Speech to unlock more housing and infrastructure across the country.

The government is developing a 10-year infrastructure strategy, which will be aligned with the industrial strategy, and is in the early stages of developing a rolling stock strategy.

Support for investors navigating the planning system will be delivered via a new planning triage service, implemented jointly between the expanded Office for Investment and the Ministry of Housing, Communities and Local Government ( MHCLG ). These steps will unlock infrastructure investment across the country, which government will augment through developing clear investment propositions.

14) Where you identified barriers in response to question 7 which relate to planning, infrastructure, and transport, what UK government policy solutions could best address these in addition to existing reforms? How can this best support regional growth?

15) How can investment into infrastructure support the industrial strategy? What can the UK government do to better support this and facilitate co-investment? How does this differ across infrastructure classes?

Access to cheap and reliable energy is an influential determinant of business competitiveness and an important consideration for internationally mobile investment. This is within a context where industrial energy will need to decarbonise to meet the UK ’s net zero goals and support the clean energy mission, including encouraging fuel switching to electricity. 

Investment in networks will bring benefits to the economy. Onshore network investment to meet net zero could directly support an additional 50,000–130,000 full-time equivalent ( FTE ) jobs by 2050, contributing an estimated £4 billion to £11 billion of gross value added (GVA) to the UK economy [footnote 128] .

The UK has a stable and enduring framework for clean energy through the Climate Change Act 2008 [footnote 129] and its carbon budget framework [footnote 130] . With the Prime Minister’s clean energy superpower mission, in the first 3 months the new government has:

• swept away barriers to onshore wind farms [footnote 131]
• consented nearly 2 gigawatts ( GW ) of new solar [footnote 132]
• delivered the most successful renewables auction in UK history, with 131 clean energy projects powering the equivalent of 11 million homes [footnote 133]
• made available £21.7 billion of funding available over 25 years to make the UK an early leader in 2 growing global sectors – CCUS and hydrogen [footnote 134]
• established Great British Energy, which will own and invest in clean energy generation in partnership with the private sector, as well as announcing a groundbreaking partnership with the Crown Estate [footnote 135]

However, a number of growth-driving sectors, including advanced manufacturing and digital and technologies have cited electricity costs as a barrier to growth.

Electricity prices in Germany are 34% to 39% lower than for comparative businesses in the UK of any size, while in France they are 31% less for small businesses rising to 53% for the very large [footnote 136] . On average, very large UK energy users face relatively high electricity prices compared with EU competitors (£228 per megawatt hour ( MWh ) in 2023, compared with £108 per MWh in France and £148 per MWh in Germany) [footnote 137] , although about 400 of the most electricity and trade-intensive UK industrial users benefit from lower electricity prices due to government policies. These high electricity costs are a major barrier to growth and investment. 

The only way to guarantee our energy security and protect billpayers is to speed up the transition away from fossil fuels and towards homegrown clean energy.

Through supporting the UK ’s clean energy industries, the UK will create good jobs in Britain’s industrial heartlands, including a just transition for the industries based in the North Sea. The North Sea is critical to the clean energy mission, and the UK has the opportunity to build on the world-leading expertise in its oil and gas supply chain.

Businesses have told the government that it needs to improve the electrification of industrial sites and bring parity with other low carbon fuels, allowing them to choose the right decarbonisation option for them [footnote 138] .

Government is considering reform of wholesale electricity markets and is also planning further engagement with stakeholders as it looks to act on the specific issue of industrial electricity prices.

Businesses also see the lack of timely grid connections as a significant barrier to investment. Respondents to the recent Call for Evidence on industrial electrification stated that the average delay industrial sites face for an upgraded connection is 5 years, and some firms are being quoted 8 to 10 years or longer for a connection. Connection delays are caused by the unprecedented volume of connections being sought, the need for major upgrades to transmission and distribution networks, and the outdated ‘first-come-first-served’ connections process.

Tackling these barriers will be critical to achieving clean power by 2030. The National Energy Systems Operator ( NESO ) and network companies are already releasing network capacity and offering earlier connection dates, and the government is working at pace with Ofgem, NESO , and network companies to further accelerate connections, including ensuring projects necessary for the UK ’s mission for clean power by 2030 can connect in time. Great British Energy will give confidence to industry and investors through development of sites for clean energy deployment. 

By investing in and owning clean power generation assets, Great British Energy will provide demand certainty to enable supply chains to invest.

The Clean Energy Mission Control, alongside planning reforms to speed up infrastructure development, will play a vital role in accelerating the transformation of the electricity network.

16) What are the barriers to competitive industrial activity and increased electrification, beyond those set out in response to the UK government’s recent call for evidence on industrial electrification?

17) What examples of international best practice to support businesses on energy, for example purchase power agreements, would you recommend to increase investment and growth?

Regulatory environment

The regulatory and competition environment in which our growth-driving sectors operate will be an important determinant of their success. For example, regulation should support emerging sectors to grow, while enabling existing sectors to modernise and evolve.

Competition

Competition and consumer policy, including subsidy control, is an important lever across and beyond the growth-driving sectors. Businesses can invest with certainty when they know that they are protected from unfair competition and consumers can buy with confidence. Competition policy creates incentives for businesses to innovate and allows more productive firms to increase their market share. 

The UK has a recognised set of regulatory and competition institutions, including the CMA . Different measures of competition for the whole economy from the CMA State of Competition report 2022 [footnote 139] and the OECD [footnote 140] suggest that while UK markets are relatively competitive, there has been a modest deterioration in performance over the last 2 decades on mark-ups and churn rates.

The growth-driving sectors have varying barriers to entry and exit, market structures, and regulation, so are affected by competition differently. In the digital and technologies sector, for example, a key concern for competition is large firms with dominant positions gained through scale economies, lock-in, and network effects [footnote 141] , [footnote 142] . To that end, the government is delivering reforms in the Digital Markets, Competition, and Consumers Act (2024) to allow additional scrutiny by the CMA of dominant firms in the digital sector, which are due to commence in January 2025.

The government is committed to robust and independent enforcement of competition law and consumer protection. It will also investigate ways to boost competition, including in growth-driving sectors, whether through competition law and economic regulation, or through integrating competition considerations into other government policies such as planning, skills, and trade openness. It will explore how policies which boost firm-level productivity and growth (such as innovation and investment) and market dynamism can drive competition by creating competitors in established sectors and growing markets in emerging sectors.

We will be consulting on a draft of the next strategic steer to the CMA from the Business and Trade Secretary to seek stakeholders’ views on competition regulation priorities. Government will also be seeking views on similar statements to major regulators in the coming months.

Figure 5a: Concentration, turnover shares of top 5 companies, weighted by turnover

This figure is the first of 4 time series graphs that illustrate UK market competition. 

Figure 5a illustrates the average market share of the 5 largest firms in each industry from 2000 to 2020. It shows that there was a marked increase in concentration in the years after the 2008 financial crisis. Since then, concentration has fallen, but it still remains above levels seen prior to 2008.

Figure 5b: Rank persistence, number of top 10 companies that were in the top 10 3 years before

Figure 5b illustrates the rank persistence of the top 10 firms in each industry over time. The rank persistence measures how many of the top 10 firms in an industry were also in the top 10 3 years ago. 

The time series shows that from 2020 to 2022, the likelihood of the largest firms in an industry remaining the largest firms has increased. It shows that while the rank persistence was around 5 before 2008, it has been between 7 and 8 up until 2020.

Figure 5c: Markups, mean and 90th percentile price-cost markup of UK companies, weighted by turnover

Figure 5c illustrates data on the markup of prices over marginal costs from 2000 to 2020. It shows that average markups have increased since 2008 from just over 20% to about 35%. It also shows that the increase in markup has been higher for the 10% most profitable firms.

Figure 5d: Entry barriers, entry and exit rates of UK companies

Figure 5d illustrates the entry and exits rates of UK companies between 2000 and 2020.

It shows that entry and exit rates have been relatively stable over the period 2000 to 2020 with 2 exceptions. First, the financial crisis in 2007/08 coincided with a sudden spike in the exit rate and a decrease in the entry rate, which took until 2013 to recover. Second, since 2015 exit rates have been increasing, with the exception of 2020 and from 2016 entry rates have been declining.

Source: Competition and Markets Authority (2022) The State of UK Competition Report

18) Where you identified barriers in response to question 7 which relate to competition, what evidence can you share to illustrate their impact and what solutions could best address them?

19) How can regulatory and competition institutions best drive market dynamism to boost economic activity and growth?

Regulation can address market failures, create economic certainty, and drive innovation to stimulate growth while protecting consumers and businesses [footnote 143] . This is vital for the industrial strategy and across the growth mission and other missions [footnote 144] .

For instance, a clear direction of travel provides businesses with the stable conditions and clear incentives to invest in technology and adopt products which move away from higher emission activities, towards net zero.

For regulation to be effective, it must be created in partnership with business and regulators, and must consider implementation and enforcement. To that end, the government is keen to understand how current regulations and the regulatory environment are impacting the growth-driving sectors, and will act where regulations are identified that are not fit for purpose or which will not drive the transformational change sought.

For example, on company law, the government is making reforms, including immediate changes to non-financial reporting regulations, with further consultation to follow.

The government will also identify where new regulatory frameworks can assist in the development of new technologies and allow for new products to be more effectively regulated and approved.

For example, establishing the Regulatory Innovation Office will help position the UK as the best place in the world to innovate, speeding up regulatory decisions for new technologies, from engineering biology to drones, in line with the industrial strategy.

The government is also looking at regulation which impacts the whole economy, including regulation that relates to planning and infrastructure, the energy transition, transport, and childcare.

The wider regulatory landscape and the ability of the regulators to drive growth are key parts of the wider growth mission. The government will provide more information on its approach to regulation in due course.

20) Do you have suggestions on where regulation can be reformed or introduced to encourage growth and innovation, including addressing any barriers you identified in question 7?

Crowding in investment

UK firms have access to one of the world’s leading financial services sectors. Despite this, as outlined already, the UK has consistently invested less than its international peers, with levels varying depending on firm size, sector, and region.

Additionally, while FDI is a UK strength, the Harrington Review noted that some of the UK ’s international peers are more strategic and better organised in attracting globally mobile investment [footnote 145] .

There is no single solution to boosting investment in the growth-driving sectors, so the industrial strategy is considering a range of policy areas, including – but not limited to – mobilising capital to ensure businesses have sufficient access to finance and using procurement policy to deliver value for money while supporting growth.

21) What are the main factors that influence businesses’ investment decisions? Do these differ for the growth-driving sectors and based on the nature of the investment (for example buildings, machinery and equipment, vehicles, software, RDI , workforce skills) and types of firms (large, small, domestic, international, across different regions)?

Mobilising capital

The UK has a complex landscape of public and private business finance providers and institutions. Some areas operate well or have seen significant progress. For example, over the last decade, the UK has closed the gap in venture capital ( VC ) investment with the US when measured as a share of GDP ( Figure 6 ). This achievement has been led by investment in the fintech sector, in which the UK ranks second globally and has 48% of European deal value [footnote 146] .

However, the government knows from businesses that there is still much to do to improve ease of access to growth capital and scale-up finance in the UK . Barriers include risk aversion, information failures, and coordination challenges. Access to finance can vary between regions, is more scarce and expensive for SMEs , and can differ across sectors based on factors such as capital intensity, technology risks, and stage of growth [footnote 147] .

Figure 6: US- UK venture capital investment multiples – GDP adjusted

This figure is a bar chart which shows how levels of venture capital ( VC ) investment compare between the United States and United Kingdom at different stages of fundraising.

Values are expressed as multiples of GDP . A value greater than one (represented by the black line) shows the US is investing more than the UK as a proportion of GDP .

The chart shows how the UK has closed the VC gap between 2014 to 2016 and 2021 to 2023. Compared with the US, in 2021 to 2023, the UK invested more as a proportion of GDP in early stage VC , and slightly less in seed and late stage VC . Across all 3 stages, the UK and US invest comparable amounts as a proportion of GDP .

Compared with the US, in 2021 to 2023, the UK invested more as a proportion of GDP in Early Stage VC , and slightly less in Seed and Late Stage VC . Across all 3 stages, the UK and US invest comparable amounts as a proportion of GDP .

Source: Department for Science, Innovation and Technology and British Business Bank analysis of Pitchbook and GDP data.

A range of government tools are relevant to these challenges and opportunities. For the most important international and large domestic investors, an expanded Office for Investment (the UK government’s investment promotion function) will provide a seamless journey, convening departments to ensure levers are pulled to unblock barriers.

To help UK SMEs get access to the capital they need to start, scale, and grow in the UK , the British Business Bank (the UK government’s economic development bank) offers a range of debt and equity products through over 200 delivery partners.

To boost investment and increase pension pots, the Chancellor of the Exchequer and Minister for Pensions are leading a landmark Pensions Investment Review. In addition, for firms who trade or could trade with international markets, UK Export Finance mobilises private capital and de-risks transactions.

The government’s approach to attracting international investors will be underpinned by the National Security and Investment Act and other protective tools, which will continue to protect national security while facilitating safe investment.

The government also uses grant funding and other financial instruments to unlock investment, including examples of grant programmes for specific sectors and Innovate UK ’s portfolio of grants, contracts and investments used to leverage private capital in innovative firms with ground-breaking technology.

In line with recommendations from the National Wealth Fund Taskforce, the government is creating the National Wealth Fund which will unlock billions of pounds in private investment, supporting the industrial strategy.

While in the first half of 2024 more capital was raised in London than the next 3 highest European exchanges combined [footnote 148] , the UK could also do more to leverage its strengths in financial services to generate UK firms who are truly global players who can scale-up, grow, and list in the UK . In 2024, the Financial Conduct Authority reformed the UK ’s listing rules to provide greater flexibility and boost international competitiveness, complementing broader reforms including the Lord Hill Listing Review and Wholesale Markets Review.

22) What are the main barriers faced by companies who are seeking finance to scale up in the UK or by investors who are seeking to deploy capital, and do those barriers vary for the growth-driving sectors? How can addressing these barriers enable more global players in the UK ?

23) The UK government currently seeks to support growth through a range of financial instruments including grants, loans, guarantees and equity. Are there additional instruments of which you have experience in other jurisdictions, which could encourage strategic investment?

The government is committed to competitive corporate taxes, as sustainable growth can only be delivered if businesses have the confidence they need to invest and grow in the UK .

Businesses and tax experts have been clear that a stable and predictable tax environment provides the confidence needed to encourage investment, innovation, and growth over the long term. Corporation tax is particularly important in companies’ investment decisions and is an area where there is an appetite for stability following several years of significant change.

In addition to targeted reliefs available to specific sectors, such as creative industries, the UK has an attractive corporate tax regime, with the lowest headline rate of corporation tax in the G7 alongside cross-cutting generous tax support for investment, R&D expenditure, and the development and commercialisation of patents [footnote 149] .

The government recognises the importance of predictability and stability within the tax system. To provide this, alongside the budget the government will publish a corporate tax roadmap setting out its approach to corporation tax for the coming years. This will include clear commitments to key features of the system and highlight several areas where the government will be exploring change.

Procurement

The public sector spent over £385 billion in 2022 to 2023 on procurement, making up almost a third of all public spending [footnote 150] . This expenditure plays a crucial role in boosting investment and growth through facilitating competition and enabling market entry, supporting the research and innovation ecosystem, as well as delivering infrastructure, public services, and national security.

Government will use the legal framework created by the Procurement Act 2023 to:

• deliver economic growth
• raise standards
• deliver greater social value

opening up procurement to new entrants such as small businesses and social enterprises.

The act will launch in February 2025, alongside a refreshed national procurement policy statement which will set out its strategic policy priorities for public procurement and to which all contracting authorities will have to have regard when the new regime comes into force. It will apply the full potential of public procurement to deliver value for money, and will set clear strategic direction for procurement in line with the government’s missions – including economic growth in support of industrial strategy objectives.

The Cabinet Office is separately consulting stakeholders on the development of the new National Procurement Policy Statement.

International partnerships and trade

The UK is a proud trading country and among the most open economies in the world. The UK holds strong and constructive partnerships all over the world, built on principles of openness and shared prosperity and a commitment to upholding the international rules-based system.

The UK is a truly global economy with connections extending to the whole world. This is facilitated by trade agreements with the EU and the Trans-Pacific Partnership all the way through to a cutting-edge digital economy agreement with Singapore and digital partnerships with Korea and Japan. The UK continues to trade more with the EU as a bloc than any other trading partner. In the 12 months to June 2024, 47% of the UK ’s total trade was with the EU [footnote 151] .

International partnerships

The UK ’s multilateral and bilateral economic partnerships with other countries are crucial to increasing growth by:

• opening up investment and export routes
• tackling barriers to trade
• partnering to create shared markets

The UK works closely with international partners to tackle issues affecting the global economy and shared economic resilience, including cooperating to reduce critical dependencies. Alongside partners in the G7, the UK has agreed to enhance resilient supply chains through partnerships around the world, especially for critical goods such as critical minerals, semiconductors, and batteries.

In support of the industrial strategy, the government will enhance the UK ’s already strong bilateral relationships by building on previous agreements and partnerships such as the UK -US Atlantic Declaration and the UK -Japan Hiroshima Accord.

The government is also developing new agreements, such as the UK -Germany Treaty, and delivering an agenda of strengthened cooperation with the EU , as agreed by the Prime Minister and the President of the European Commission.

Strategic investment partnerships, such as with the United Arab Emirates and Qatar, will also support economic links, capital flows, and longer-term investment pipelines.

The UK has strong foundations, but there is more that government can do to ensure that its work with other countries brings tangible benefits for sectors at the forefront of growth.

To deliver the industrial strategy, the government will build international partnerships that support growth-driving sectors, and help to manage the geopolitical risks and opportunities affecting growth.

The UK ’s overseas trade and diplomatic network – one of the largest in the world – will proactively support international business to invest in the UK , and UK companies to export and find new markets. This approach will be complementary to other government work in this area, including the Strategic Security Review and the Strategic Defence Review.

Trade is an important driver of economic growth.

Openness to global markets gives firms access to better, cheaper, and a wider variety of inputs to their production processes, while also expanding the markets into which firms can sell products. This encourages firms to scale up domestic production, increasing the overall level of output in the economy, as well as creating efficiencies from economies of scale and learning from a broader range of companies.

In addition to boosting standards of living, consumers also benefit from a wider variety of goods and services. Research shows a 10% increase in openness is associated with a 4% increase in income per head [footnote 152] and that UK firms that export goods are 21% more productive than non-exporters [footnote 153] , [footnote 154] , [footnote 155] .

Growth in UK trade has been weak in recent years, with UK trade intensity [footnote 156] down 2.5 percentage points in the 12 months to June 2024 compared with its pre-COVID-19 (2018) level [footnote 157] . Within the headline figures, stronger UK services trade has offset a weaker goods trade performance [footnote 158] .

The government hears from business that trade barriers inhibit key UK industries from trading, ranging from product-specific prohibitions of UK imports to differences between UK and partner country regulations and standards. UK firms could export more: in 2022, around 11.9% of UK registered businesses were exporters [footnote 159] , while 19% of registered businesses had never exported but stated they could export, rising to 22% in 2023 [footnote 160] .

Harnessing the potential of digital trade, which accounts for over half (55%) of UK exports in 2020, is also central to delivering a strong and resilient economy in the UK [footnote 161] and digital trade agreements (such as the UK -Singapore Digital Economy Agreement) and cooperation with partner countries can support consumers and businesses to access new opportunities and safeguard the broader digital environment.

The government also hears from business that occupational regulation and recognition of professional qualifications ( RPQ ) arrangements are a key facilitator of trade in services and support labour market outcomes [footnote 162] . The professional and business services sector can particularly benefit from international RPQ because it contains several important regulated professions.

The government wants to work with the EU to boost jobs, economic growth, and UK - EU trade, including by tackling barriers to trade through seeking to strengthen mutual recognition of professional qualifications.

Efficient customs and border processes also have a positive impact on UK trade by reducing complexity and costs for imports and exports, while protecting against illegitimate trade and enabling the UK to meet its legal obligations under international agreements. Simplifying customs and border processes and providing comprehensive guidance and support to businesses help to reduce administrative costs, including in growth-driving sectors [footnote 163] .

The government will set out its trade strategy, aligned with the industrial strategy, to help businesses to overcome barriers and maximise trade for the growth-driving sectors and across the whole economy.

24) How can international partnerships (government-to-government or government-to-business) support the industrial strategy?

25) Which international markets do you see as the greatest opportunity for the growth-driving sectors and how does it differ by sector?

A core objective of the industrial strategy is unleashing the full potential of our cities and regions by attracting investment and creating the best environment for businesses in them to thrive.

The UK ’s economic performance is skewed towards London and the South East, while other city regions have historically underperformed relative to both the national economy and their international counterparts ( Figure 7 ). The world-leading industries in London and the South East have a critical role in driving national prosperity.

However, there is enormous untapped potential outside the capital and its surrounding areas. City regions like Greater Manchester, the West Midlands, and Glasgow, are not generating the growth and local prosperity that urban agglomerations of their size should. Centre for Cities analysis shows that for the 8 largest cities outside London, the combined gap between actual and potential productivity is £47 billion per year. When including the next 25 city regions outside the Greater South East (which also underperform), this increases to an estimated £66 billion per year [footnote 164] .

Figure 7: Productivity and population, major international cities

This figure is a scatter plot which shows the 112 cities in the G7 which are the size of Nottingham or larger. For each city, it plots GDP per worker (USD, thousands) against a log of their population in 2018. Red dots represent UK cities, while blue dots represent international cities.

The scatter plot shows a general positive relationship (represented by the dotted black trendline) between GDP per worker and the log of population across G7 cities. It shows that the larger the population of a city, the higher the GDP per capita.

All UK cities fall below this trendline showing that UK cities’ GDP per worker is lower than their international comparators, given their population.

Source: Centre for Cities (2024) Climbing the Summit, Big Cities in the UK and G7

Within sectors, businesses co-locate in clusters to take advantage of economies of scale, talent pipelines, land, supply chains, knowledge spillovers, and more. The UK has world-leading clusters across the country, including:

• life sciences in Cambridge and the Liverpool city region
• financial services in Edinburgh, Leeds and London
• advanced manufacturing in Broughton and Newport, Greater Manchester, the West Midlands, the North East, and South Yorkshire
• digital industries in Bristol and Northern Ireland
• clean energy industries in Aberdeen and Derby

The industrial strategy will coordinate sectoral and business environment policies to overcome place-based barriers in key clusters and enhance their attractiveness as destinations for private investment.

Growing high-potential clusters 

The industrial strategy will concentrate efforts on places with the greatest potential for the growth sectors: city regions, high-potential clusters, and strategic industrial sites. The success of the industrial strategy’s growth-driving sectors can only be achieved if these clusters reach their full potential, supported through a place-based approach to policy.

Local growth plans are a cornerstone of the place-based approach. These locally owned, 10-year strategies will set out how mayoral combined authorities ( MCAs ) will use their devolved powers and funding to drive growth in their region. They will build on the region’s unique strengths and opportunities to support sectors, identify wider business environment priorities, and provide a framework to unlock private investment. They represent strategic partnerships between central government and MCAs to identify priorities for growth and will be aligned to the industrial strategy. 

Alongside this, the government will explore how to build on existing place-based initiatives to support high-potential clusters and align them behind the industrial strategy. This includes considering how the industrial strategy can be a ‘lens’ for informing the recommendations for new towns locations, creating new large-scale settlements in places where high housing demand constrains the growth of high-potential clusters. 

The government will explore how to create the best pro-business environment possible in city regions and high-potential clusters, helping their sectoral strengths to flourish. It will:

• harness research and development ( R&D ) investment to build strong regional innovation ecosystems
• use financial mechanisms like the National Wealth Fund to support investible propositions across the UK
• ensure investment is a catalyst for growing city regions
• support local businesses and education providers to understand and address the skills needs specific to their areas through tailored Local Skills Improvement Plans

Finally, the government will explore how the industrial strategy can identify, select and intervene in industrial sites across the UK to realise ambitious propositions and become magnets for globally mobile investment. For example, many peer countries are intervening to de-risk, reduce development timescales, and accelerate growth in strategic industrial sites through planning reforms and other policies.

Working in partnership with national and regional leaders 

The industrial strategy will support a joined-up approach to unleashing regional growth. This is not the first time a national government has tried to deliver a place-based industrial strategy, but this time there are stronger foundations for success.

The government is committed to devolving significant powers to Mayoral Combined Authorities across England, giving them the tools they need to grow their sectoral clusters and improve the local business environment. Partnership with devolved governments will make this a UK -wide effort and support the considerable sectoral strengths of Scotland, Wales and Northern Ireland.

Methodology for identifying high-potential clusters 

The government is working with local partners to bring together qualitative and quantitative evidence to understand the strong sectoral clusters that exist across the UK , both emerging and established. This work will build on the Innovation Clusters Map published by the Department for Science, Innovation, and Technology ( DSIT ) in February 2024 [footnote 165] . Patterns of clustering differ between different sectors, for example, between manufacturing and services. 

The starting point is that successful clusters are characterised by strong concentrations of employment, output, high productivity and innovation. Within this, clusters can be strong in different ways: either having deep expertise in a concentrated spatial area, or encompassing related businesses and employees in broad spatial areas that cross administrative boundaries.

Clusters can take any geographical shape and often span large geographical areas, cutting across local government boundaries and nations of the UK . When defining clusters, the government will need to strike a balance between alignment with existing administrative and policy structures, and not imposing arbitrary restrictions. 

This green paper seeks evidence and analysis to build on this high-level methodology. The responses will be used alongside further work and engagement with experts inside and outside of government, and within places themselves, to deepen the understanding of sectoral clusters and helpful placed-based policy interventions for growing sectors and attracting investment.

26) Do you agree with this characterisation of clusters? Are there any additional characteristics of dimensions of cluster definition and strength we should consider, such as the difference between services clusters and manufacturing clusters?

27) What public and private sector interventions are needed to make strategic industrial sites ‘investment-ready’? How should we determine which sites across the UK are most critical for unlocking this investment?

28) How should the industrial strategy accelerate growth in city regions and clusters of growth sectors across the UK through local growth plans and other policy mechanisms?

29) How should the industrial strategy align with devolved government economic strategies and support the sectoral strengths of Scotland, Wales and Northern Ireland?

Partnerships and institutions

The ambition set out across this paper can only be realised in partnership. Only by working with the network of businesses, investors, civil society, international partners, local leaders and devolved governments who play a critical role in the UK economy, can we shape and deliver an industrial strategy that can truly drive growth.

At its core, industrial strategy is rooted in building institutional capacity to develop and deliver effective economic policy [footnote 166] , [footnote 167] . Past industrial strategies have been held back by weak coordination and delivery, hence this is a key focus of this industrial strategy. This includes:

building structures and ways of working which allow for holistic policy solutions, that cut across departmental boundaries and are transformational in scope – for example, through a mission-based approach [footnote 168]

creating ongoing and open dialogue between business, experts, and policymakers which ensure that policy is fit for purpose, including being able to receive timely feedback from users in order to create, amend, or stop policy [footnote 169]

creating mechanisms which allow government to monitor its progress and to learn lessons from the past, from business, from other countries, and from other areas of policy at the national and sub-national level [footnote 170] , [footnote 171]

placing greater emphasis on effective policy delivery, including working collaboratively with delivery partners inside and outside government [footnote 172]

creating stable and certain policy direction to allow business and delivery partners to plan and make long-term (investment) decisions, with less policy churn [footnote 173]

To this end, the industrial strategy will operate through new institutional structures that should set the foundations for long-term and agile implementation, working with groups of engaged experts who can guide development and delivery. A new independent Industrial Strategy Council will support long-term stability and place expertise at the heart of the strategy.

The government will convene and co-design with all 8 growth-driving sectors.

For each, an ambitious sector plan will be designed in partnership with business, devolved governments, regions and other stakeholders, through bespoke arrangements tailored to each sector. The government will also explore how it can improve the way that it interfaces with sectors and works across departments, drawing on the success of models like the Office for Life Sciences. 

The government will engage widely throughout the development of this strategy. The start of this is drawing insight through this green paper. Beyond this, we will conduct roundtables and conversations in the coming months to gather expertise and insight to shape our approach. This includes engaging:

businesses through Ministerial meetings, CEO roundtables, and regional visits to ensure the government’s plans reflect what it means to run and grow a business – industrial strategy mission groups will bring together business, from scale-ups to large enterprises, to develop targeted solutions on barriers to investment and growth

business representative organisations and trade unions through regular ministerial calls – an industrial strategy forum will bring these groups together to test ideas, consider cross-cutting themes, and provide updates on the development of the strategy

devolved governments, elected mayors, and other local leaders, including through the Council of the Nations and Regions, and Mayoral Councils, to galvanise regional and place-based growth opportunities, and align where appropriate

thought leaders and experts through policy labs to stress-test ideas in detail and consider examples of what has and has not worked well in the past

international partners through government-to-government dialogues to exchange policy views and identify areas for cooperation

Industrial Strategy Council

To underline the government’s commitment to business, it will establish a statutory, independent, and evidence-led Industrial Strategy Council ( ISC ), reporting to the Business and Trade Secretary and the Chancellor of the Exchequer.

The ISC will be responsible for informing and monitoring both the development and delivery of the industrial strategy over the long term, ensuring that policy interventions are informed by a broad and high-quality evidence base. The ISC will make recommendations, focusing on growth-driving sectors and the pro-business environment. It will also monitor and evaluate impact – data and analysis will be central to this.

The ISC , supported by a secretariat of analysts and policy professionals, and by bodies across the public sector, will: 

monitor progress on growth-driving sectors and policies 

undertake analysis to improve the evidence base to include in its reports and advice 

feed into policy development through public reports, ministerial commissions, and private discussion papers

The government will legislate to establish this statutory body as soon as parliamentary time allows, building cross-party support in the process. Legislation will ensure the ISC ’s permanence as an institution and that it has the necessary powers to deliver its objectives.

In the meantime, to ensure that the industrial strategy is developed with independent expert advice, the government is introducing an interim Industrial Strategy Advisory Council. The advisory council will be chaired by Clare Barclay, CEO of Microsoft UK , who brings a wealth of leadership experience at the top-flight of UK business across technology, innovation, and AI .

Further members will be confirmed in due course, drawn from across business, academia and trade unions to provide a broad range of skills and expertise.

Business partnership framework 

The government is developing a business partnership framework to underpin the design and implementation of the industrial strategy and wider policies.

We recognise that government can improve the interface between government and business, better help businesses to navigate the policy landscape, and build government’s capability to better understand business needs. The framework could include: 

a new approach to business engagement, setting out best practice and simplifying routes to engagement – this would offer support to those working with sectors and in business-facing roles and encourage development of policy in a more open way with businesses from the start

a new business academy for government, with a targeted learning and development offer, underpinned by a standards framework setting expectations for all business-facing civil servants from entry to expert level 

a new approach to secondments, to support civil servants to spend up to a year in business to increase their experience and understanding of the issues businesses face, to bring back to government and improve policy development

a data-led approach to gathering timely analysis, insights, and intelligence from business and wider sources, and sharing these widely across government

30) How can the Industrial Strategy Council best support the UK government to deliver and monitor the industrial strategy?

31) How should the Industrial Strategy Council interact with key non-government institutions and organisations?

32) How can the UK government improve the interface between the Industrial Strategy Council and government, business, local leaders and trade unions?

This green paper sets out government’s commitment to develop a modern, targeted industrial strategy with the objective of long-term, sustainable, inclusive, and resilient growth, by spurring investment into all parts of the UK .

In the coming months the government will work with business, unions, experts, representative groups, and other stakeholders to develop the industrial strategy. In addition to the work of the Industrial Strategy Advisory Council, the government will be holding focused roundtables and conversations across the UK between now and spring.

The government will work closely with regional, local, and devolved government partners to build out local plans for growth aligned to the national Industrial Strategy framework.

The response to this green paper will be included in the final industrial strategy and growth-driving sector plans, to be published alongside the spending review in spring 2025. The industrial strategy’s implementation will be driven through dedicated teams, working closely with the Industrial Strategy Advisory Council.

Annex – theory of change

Economic growth is a complex issue with interrelated short-term and long-term drivers, many of which are structural in nature [footnote 174] .

To effectively prioritise policies within the industrial strategy, targeted at the right sectors and types of economic activity, the government needs to rationalise this complexity into a series of potential causal pathways. This will also help to identify where to further develop the evidence and analysis. 

To this end, a high-level theory of change is in development to illustrate the logical relationships between industrial strategy policies and growth. For a given programme or policy, a good theory of change needs to set out:

• impact: the high-level goal of the programme
• outcomes: what needs to happen to achieve the policy or programme’s objectives
• intermediate outcomes: the intermediate steps necessary to get from outputs to real-world impact
• outputs: the actions that the UK government will need to take (including implementing policies) in order to affect the (intermediate) outcomes
• inputs: the resources and conditions necessary for the UK government to deliver these outputs

Using this terminology, the ultimate impact of the industrial strategy theory of change is the overarching objective of long-term, sustainable, inclusive, and secure economic growth. The government has also developed an indicative set of high-level outcomes to guide policy development over the coming months. Specifically, the industrial strategy will enable:

successful sectors: raise investment in growth-driving sectors to increase their size and productivity

successful places: grow or establish high-productivity clusters of growth-driving sectors across the UK , driving up overall GDP growth and increasing opportunity through the benefits of increased agglomeration

successful markets: boost market dynamism, innovation, and technological adoption and diffusion through increased competition, an improved capability offer to businesses, and coordinated fiscal and non-fiscal measures

successful people: reduce skills mismatches and boost higher-paid employment in growth-driving sectors, including via increased enrolment in apprenticeships and technical education

successful institutions: improve UK industrial policy stability and coordination through building partnerships and the creation of a statutory Industrial Strategy Council empowered to advise, make recommendations, and monitor industrial strategy policy

The theory of change is a work in progress.

Over the coming months, the government will work alongside the Industrial Strategy Advisory Council and other stakeholders and experts to build a set of intermediate outcomes: measurable variables that are critical to achieving its outcomes and ultimate impact. This will allow the government to identify the outputs that should be prioritised within the industrial strategy.

The successful sectors strand of an industrial strategy theory of change might identify a goal for higher investment in the industrial strategy growth-driving sectors.

The sector plans would be developed to help drive investment in these sectors and secure their growth. They would do this by developing a long-term vision for each sector and identifying barriers to growth and policies to unlock investment.

This in turn will require a variety of government resources as well as complementary actions by businesses.

In terms of the theory of change, definitions in this scenario are:

• outcome: successful sectors
• intermediate outcome: higher investment
• output: sector plans
• inputs: government resources and complimentary actions by businesses

Developing this understanding of the industrial strategy’s contribution to economic growth and other strategic objectives using a theory of change will also enable the government to identify and map critical interdependencies with:

• other policy activity
• the wider growth mission
• other missions, such as the clean energy and opportunity missions

In parallel, logical frameworks are in development, which the government will use to explore and assess the potential causal pathways prioritised by the theory of change. Logical frameworks do this by assessing the assumptions required for these pathways to exist and the risks around those assumptions. They can therefore inform an assessment of whether an action or policy will meaningfully contribute to the industrial strategy’s objectives. 

Once the government has a prioritised set of outcomes and outputs to meet the industrial strategy’s objectives, this will be used to develop policies and an associated monitoring and evaluation framework. This will also be done in partnership with the ISC and others.

Having a robust method to assess the performance of policies is critical to the successful delivery of the industrial strategy. It will allow the government to assess whether policies are delivering on their stated objectives and therefore whether implementation should be improved or the policy stopped or revised.

33) How could the analytical framework (for example, identifying intermediate outcomes) for the industrial strategy be strengthened?

34) What are the key risks and assumptions we should embed in the logical model underpinning the theory of change?

35) How would you monitor and evaluate the industrial strategy, including metrics?

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Coyle and Muhtar (2021) UK ’s Industrial Policy Learning from the Past

Coyle and Muhtar (2022) You’re Not Speaking my Language

Creative Industries Policy and Evidence Centre (2024) International Trade and the UK Creative Industries

Dealroom (2024) UK Tech: A Forward Look to 2024

Dealroom, Guides: United Kingdom

Deloitte (2024) Deloitte CFO Survey Quarter 2 2024

Department for Business and Trade (2023) Harrington Review of Foreign Direct Investment

Department for Business and Trade (2023) National Survey of Registered Businesses’ Exporting Behaviours, Attitudes and Needs

Department for Business and Trade (2024) Business Investment Analysis 

Department for Business and Trade (2024) Number of Exporting Registered Businesses in the UK , 2016 to 2022

Department for Business and Trade (2024) Summary of Findings from the Call for Evidence, House of Lords (2024) Who Watches the Watchdogs?

Department for Education (2019) Higher Technical Education: The Current System and the Case for Change

Department for Education (2023) Employer Skills Survey, 2022

Department for Education (2023) Skills and UK Productivity

Department for Education (2024) Skills England: Driving Growth and Widening Opportunities

Department for Energy Security and Net Zero (2022) Electricity Networks Strategic Framework: Enabling a Secure, Net Zero Energy System

Department for Energy Security and Net Zero (2024) Digest of UK Energy Statistics (DUKES): Energy

Department for Energy Security and Net Zero (2024) Enabling Industrial Electrification: A Call for Evidence

Department for Energy Security and Net Zero (2024) Energy Trends: September 2024

Department for Energy Security and Net Zero (2024) Energy Trends: UK Renewables

Department for Energy Security and Net Zero (2024) International Industrial Energy Prices - Quarterly: Industrial electricity prices in the EU for small, medium, large and extra large consumers (QEP 541 to 544)

Department for Energy Security and Net Zero (2024) UK first major economy to halve emissions

Department for Energy Security and Net Zero, and Department for Business, Energy and Industrial Strategy (2021) Net Zero Strategy: Build Back Greener

Department for Science, Innovation and Technology (2023) Business Data use and Productivity Study (wave 1)

Department for Science, Innovation and Technology (2023) The Innovation Clusters Map from the Department for Science, Innovation and Technology

Department for Science, Innovation and Technology (2024) UK Business Data Survey 2024

Department for Transport (2017) Transport Infrastructure Efficiency Strategy

Department of Health and Social Care, and Department for Science, Innovation and Technology (2024) Bioscience and Health Technology Sector Statistics 2021 to 2022

DHL (2024) Global Connectedness Report

Economics Observatory (2020) Why is Uncertainty so Damaging for the Economy?

European Union (2023) European Data Market Study 2021 to 2023

EY (2024) Foreign Direct Investment in UK Grows as Europe Declines

Financial Times (2024): Europe’s Leading Start-Up Hubs

Findexable (2021) Global Fintech Rankings Report

Foreign, Commonwealth and Development Office (2024) UK - EU Trade and Cooperation Agreement, UK Domestic Advisory Group: 2024 to 2025 Priorities Report

Frontier Economics (2024) Accelerating Progress Towards Climate and Policy Goals through Environmental Regulation

Global University Venturing (2023)

HM Government (2008) Climate Change Act

HM Government (2021) Net Zero Strategy

HM Government (2023) Carbon Budget Delivery Plan

HM Government (2024) Government Reignites Industrial Heartlands 10 Days Out From the International Investment Summit

HM Government (2024) Government Secures Record Pipeline of Clean Cheap Energy Projects

HM Government (2024) New Great British Energy Partnership Launched to Turbocharge Energy Independence

HM Government (2024) Policy Statement on Onshore Wind

HM Government (2024) Solar Taskforce Meets in Drive for Clean Power

HM Treasury (2010) Infrastructure Cost Review

HM Treasury (2019) Unlocking Digital Competition, Report of the Digital Competition Expert Panel 

HM Treasury (2024) Public Expenditure Statistical Analyses 2024

House of Commons (2023) The Financial Sector and the UK ’s Net Zero Transition

House of Commons Committee (2023) Batteries for Electric Vehicle Manufacturing Batteries for Electric Vehicle Manufacturing

Institute for Government (2024) 10 Lessons for Successfully Restarting an Industrial Strategy

Institute for Public Policy Research (2023) Making Markets in Practice

Institute for Public Policy Research (2024) Making Markets: The City’s Role in Industrial Strategy

Institute for Public Policy Research (2024) Manufacturing Matters: The Cornerstone of a Competitive Green Economy

International Institute for Management Development (2023 World Digital Competitiveness Ranking

International Monetary Fund (2021) Building Back Better: How Big Are Green Spending Multipliers?

International Monetary Fund (2022) Customs Matters: Strengthening Customs Administration in a Changing World

International Renewable Energy Agency (2024) Renewable capacity statistics

International Renewable Energy Agency Renewable Energy Employment by Country

IPSOS (2023) Global Perceptions: How 18 to 34-year-olds see the UK and the world

Learning And Work Institute (2024) Why 2024 Should be a Year for Employer Investment in Training

London Stock Exchange Group (2024) London Stock Exchange’s Equity Capital Markets Update – Quarter 2 2024

Mazzucato (2021) Mission Economy: A Moonshot Guide to Changing Capitalism

McKinsey (2021) Opportunities for UK Businesses in the Net-Zero Transition

Ministry of Defence (2024) Annual Report and Accounts 2023 to 2024

Ministry of Defence (2024) Ministry of Defence Regional Expenditure Statistics with Industry: 2022 to 2023

Ministry of Defence (2024) Ministry of Defence Supported Employment Estimates: 2022 to 2023

Newfarmer and Sztajerowska (2012) Trade and Employment in a Fast-Changing World, in Organisation for Economic Cooperation and Development (2012) Policy Priorities for International Trade and Jobs, Douglas Lippoldt (ed)

Office for Budget Responsibility (2024) Economic and Fiscal Outlook

Office for Budget Responsibility (2024) Fiscal Risks and Sustainability Report

Office for National Statistics (2018) UK Trade in Goods and Productivity: New Findings

Office for National Statistics (2022) Firm-Level Labour Productivity Measures from the Annual Business Survey, UK

Office for National Statistics (2023) Firm-Level Business Dynamism Estimates from the Longitudinal Business Database: Summary Statistics, UK

Office for National Statistics (2023) Output per Hour Worked, UK

Office for National Statistics (2023) Trends in UK Business Dynamism and Productivity

Office for National Statistics (2023) Workforce Jobs by Industry and Region

Office for National Statistics (2024) Balance of Payments April to June 2024

Office for National Statistics (2024) Economically Inactive: UK

Office for National Statistics (2024) Employee Earnings in the UK

Office for National Statistics (2024) GDP Quarterly National Accounts April to June 2024

Office for National Statistics (2024): Real Average Weekly Earnings Using Consumer Price Inflation (seasonally adjusted)

Office for National Statistics UK Trade Time Series

Oliver Wyman (2024) Accelerating Regional Growth

Organisation for Economic Cooperation and Development (2018) Market Opening, Growth and Employment

Organisation for Economic Cooperation and Development (2019) Indicators of Employment Protection

Organisation for Economic Cooperation and Development (2020) Laggard Firms, Technology Diffusion and its Structural and Policy Determinants

Organisation for Economic Cooperation and Development (2020) Raising the Basic Skills of Workers in England

Organisation for Economic Cooperation and Development (2021) Methodologies to Measure Market Competition

Organisation for Economic Cooperation and Development (2022) Population with Tertiary Education – 25 to 34-year-olds, percentage, 2022

Organisation for Economic Cooperation and Development (2022) An Industrial Policy Framework for OECD Countries: Old Debates, New Perspectives

Organisation for Economic Cooperation and Development (2022) Skills for Jobs

Organisation for Economic Cooperation and Development (2022) Value for Money in School Education, chapter on The Importance of Human Capital for Economic Outcomes

Organisation for Economic Cooperation and Development (2024) ICT Access and Usage by Businesses

Organisation for Economic Cooperation and Development (2024) Making the Most out of Digital Trade in the United Kingdom 

Organisation for Economic Cooperation and Development (2024) Product Market Regulation Indicators

Organisation for Economic Cooperation and Development (2024) Corporate Tax Statistics Database

Organisation for Economic Cooperation and Development Productivity Database

Organisation for Economic Cooperation and Development Quarterly National Accounts

Organisation for Economic Cooperation and Development: Economic Surveys: United Kingdom

Organisation for Economic Cooperation and Development: Going for Growth

Programme on Innovation Diffusion (2024) Cracking the Productivity Code: An International Comparison of UK Productivity

PwC (2016) High Speed Rail International Benchmarking Study

PwC (2024) Global Entertainment and Media Outlook

QS (2024) QS World University Rankings by Subject 2024: Life Sciences and Medicine

QS (2025) World University Rankings 2025: Top Global Universities

Resolution Foundation (2022) Enduring strengths: Analysing the UK ’s Current and Potential Economic Strengths, and What They Mean for its Economic Strategy, at the Start of the Decisive Decade

Resolution Foundation (2022) Growing Clean

Resolution Foundation (2023) Beyond Boosterism

Resolution Foundation (2023) Ending Stagnation: A New Economic Strategy for Britain

Rodrik (2004) Industrial Policy for the Twenty-First Century

Rodrik (2008) Industrial Policy: Don’t Ask Why, Ask How

Sumitomo Electric (2024) Sumitomo Electric commences construction work for its new Subsea Cable factory in Scotland

Tech Nation Report (2024) UK Tech in the Age of AI

The Prince’s Responsible Business Network (2022) Rebooting Lifelong Learning for a Skilled Workforce

The Productivity Institute (2023) A New UK Policy Institution for Growth and Productivity – A Blueprint

The Productivity Institute (2023) The Productivity Agenda

UK Government (2021) The Kalifa Review of UK FinTech

UK Government (2023) Global Trade Outlook February 2023

UK Government (2024) Analysis of Geographical Disparities

UK Government (2024) Government Reignites Industrial Heartlands 10 Days Out From the International Investment Summit

UN Trade and Development (2024) World Investment Report

United Nations Trade and Development (2024) Creative Economy Outlook 2024

United Nations Trade and Development (2024) Services (BPM6): Exports by Service Category, Trade Partner World, 2023

United Nations Trade and Development (2024) World Investment Report

University of Cambridge (2024) UK Innovation Report

World Intellectual Property Organisation (2024) Global Innovation Index 2024

Z/Yen and CDI (2024) The Global Financial Centres Index 36

Z/Yen (2021) The Global Green Finance Index 8

Z/Yen The Global Financial Centres Index

Z/Yen The Global Green Finance Index

Department for Business and Trade analysis of Office for National Statistics (2023) Output per Hour Worked, UK .  ↩

This green paper will use ‘businesses’, ‘firms’, and ‘industry’ interchangeably.  ↩

University of Cambridge (2024) UK Innovation Report .  ↩

UN Trade and Development (2024) Services (BPM6): Exports by Service Category, Trade Partner World, 2023 .  ↩

DHL (2024) Global Connectedness Report .  ↩

Resolution Foundation (2022) Enduring strengths: Analysing the UK ’s Current and Potential Economic Strengths, and What They Mean for its Economic Strategy, at the Start of the Decisive Decade .  ↩

Department for Energy Security and Net Zero (2024) UK first major economy to halve emissions .  ↩

Institute for Public Policy Research (2024) Manufacturing matters: The Cornerstone of a Competitive Green Economy .  ↩

Resolution Foundation (2022) Growing Clean .  ↩

Financial Times (2024): Europe’s Leading Start-Up Hubs .  ↩

Dealroom, Guides: United Kingdom. .  ↩

Organisation for Economic Cooperation and Development (2022) - Population with Tertiary Education - 25–34-year-olds, %, 2022 .  ↩

IPSOS (2023) Global Perceptions: How 18–34-Year-olds See the UK and the World .  ↩

CMA (2022) The State of UK Competition Report .  ↩

Z/Yen & CDI (2024) The Global Financial Centres Index 36 .  ↩

Findexable (2021) Global Fintech Rankings Report .  ↩

Z/Yen (2021) The Global Green Finance Index 8 .  ↩

DBT analysis of Nomis data .  ↩

United Nations Trade and Development (2024) World Investment Report .  ↩

EY (2024) Foreign Direct Investment in UK Grows as Europe Declines .  ↩

An indicator of how the number of citations received by an article compares to the average or expected number of citations received by other similar publications.  ↩

Bank of England (2019) In Focus, Uncertainty and Brexit .  ↩

Bloom et al (2019) The Impact of Brexit on UK Firms .  ↩

Economics Observatory (2020) Why is Uncertainty so Damaging for the Economy? .  ↩

Resolution Foundation (2023) Ending Stagnation: A New Economic Strategy for Britain , Organisation for Economic Cooperation and Development Economic Surveys: United Kingdom and, Organisation for Economic Cooperation and Development Going for Growth .  ↩

Department for Business and Trade calculations based on Office for National Statistics (2024): Real average weekly earnings using consumer price inflation (seasonally adjusted) .  ↩

The Productivity Institute (2023) The Productivity Agenda , Resolution Foundation (2023) Ending Stagnation: A New Economic Strategy for Britain , Organisation for Economic Cooperation and Development Economic Surveys: United Kingdom and, Organisation for Economic Cooperation and Development Going for Growth .  ↩

DBT analysis of Organisation for Economic Cooperation and Development Productivity Database. .  ↩

Although estimates of the size of the contribution of investment to our poor productivity vary, it is typically identified as the largest individual component. See for example Programme on Innovation Diffusion (2024) Cracking the Productivity Code: An International Comparison of UK Productivity .  ↩

Department for Business and Trade calculations based on Organisation for Economic Cooperation and Development Data. See also The Productivity Institute (2023) The Productivity. Agenda , Resolution Foundation (2023) Beyond Boosterism .  ↩

Resolution Foundation (2023) Beyond Boosterism .  ↩

For more details on this research see Department for Business and Trade (2024) Business Investment Analysis .  ↩

Usually taken to include Manchester, Birmingham, Leeds, Glasgow, Liverpool, Sheffield, Newcastle, Bristol, Nottingham, Cardiff, Leicester.  ↩

Centre for Cities (2021) So You Want to Level Up? .  ↩

Resolution Foundation (2023) Ending Stagnation: A New Economic Strategy for Britain .  ↩

In this context this green paper defines ‘diffusion’ as the process by which new ideas spread across the economy, while ‘adoption’ speaks to the implementation of these ideas by firms.  ↩

World Intellectual Property Organisation (2024) Global Innovation Index 2024 .  ↩

International Institute for Management Development (2023 World Digital Competitiveness Ranking .  ↩

This green paper uses ‘market dynamism’ and ‘business dynamism’ interchangeably.  ↩

Office for National Statistics (2022) Firm-Level Labour Productivity Measures from the Annual Business Survey, UK .  ↩

Office for National Statistics (2023) Firm-Level Business Dynamism Estimates from the Longitudinal Business Database: Summary Statistics, UK .  ↩

This green paper uses ‘policies’, ‘levers’, and ‘interventions’ interchangeably.  ↩

This green paper uses ‘cross-cutting’, ‘pro-business environment’, ‘horizontal’, and ‘cross-economy’ interchangeably.  ↩

Institute for Public Policy Research (2023) Making Markets in Practice .  ↩

See Organisation for Economic Cooperation and Development (2022) An Industrial Policy Framework for OECD Countries: Old Debates, New Perspectives for a useful discussion of the issues.  ↩

For example, as a sector grows it becomes more productive due to ‘learning by doing’ and experimentation, but also because certain fixed costs such as key infrastructure or institutions are spread over a larger output.  ↩

This excludes the real estate sector, which is not comparable due to the nature of how output is generated in this sector. Telecommunications growth accounts for a disproportionate share of productivity growth in this group, representing the rise of the digital economy – but other high productivity sectors are nonetheless key growth drivers.  ↩

The Productivity Institute (2023) The Productivity Agenda .  ↩

Andres et al (2021) Seizing Sustainable Growth Opportunities from Carbon Capture, Usage and Storage in the UK .  ↩

Institute for Public Policy Research (2024) Manufacturing Matters: The Cornerstone of a Competitive Green Economy .  ↩

Standard Industrial Classification ( SIC ) codes are updated infrequently and therefore often fail to effectively capture emerging sectors. Since traditional sector data is backwards-looking there may also be an incumbency bias. There is overlap between sectors and some companies may be misclassified in SIC codes.  ↩

Moreover, traditional metrics such as GVA are problematic for prioritising nascent sectors in early stages of development, for example sectors with a large number of firms in the start-up phase could have very low or even negative GVA as their costs exceed their revenues.  ↩

Office for National Statistics (2024) Employee Earnings in the UK .  ↩

Office for National Statistics (2023) Workforce Jobs by Industry and Region (annualised quarterly data based on average of the 4 quarters of 2022) .  ↩

Department for Energy Security and Net Zero / Department for Business, Energy & Industrial Strategy (2021) Net Zero Strategy: Build Back Greener .  ↩

House of Commons Committee (2023) Batteries for Electric Vehicle Manufacturing Batteries for Electric Vehicle Manufacturing .  ↩

Climate Action Tracker , as of 31 May 2024.  ↩

McKinsey (2021) Opportunities for UK Businesses in the Net-Zero Transition .  ↩

International Monetary Fund (2021) Building Back Better: How Big Are Green Spending Multipliers? .  ↩

Sumitomo Electric (2024) Sumitomo Electric Commences Construction Work for its New Subsea Cable Factory in Scotland .  ↩

International Renewable Energy Agency Renewable Energy Employment by Country .  ↩

Climate Change Committee (2023) A Net Zero Workforce .  ↩

United Nations Trade and Development (2024) Creative Economy Outlook 2024 .  ↩

British Phonographic Industry (2020) .  ↩

British Film Institute (2023) .  ↩

Creative Industries Policy and Evidence Centre (2024) International Trade and the UK Creative Industries .  ↩

PwC (2024) Global Entertainment and Media Outlook .  ↩

UK Government (2023) Global Trade Outlook February 2023 .  ↩

Ministry of Defence (2024) Ministry of Defence Supported Employment Estimates: 2022 to 2023 .  ↩

Ministry of Defence (2024) Ministry of Defence Regional Expenditure Statistics with Industry: 2022 to 2023 .  ↩

Ministry of Defence (2024) Annual Report and Accounts 2023 to 2024 .  ↩

Largest Companies by Market Cap , as of 8 October 2024.  ↩

Tech Nation Report (2024) UK Tech in the Age of AI .  ↩

Dealroom (2024) UK Tech: A Forward Look to 2024 .  ↩

House of Commons (2023) The Financial Sector and the UK ’s Net Zero Transition .  ↩

Z/Yen The Global Financial Centres Index .  ↩

UK Government (2021) The Kalifa Review of UK FinTech .  ↩

Z/Yen The Global Green Finance Index .  ↩

Department for Health and Social Care / Department for Science, Innovation and Technology (2024) Bioscience and Health Technology Sector Statistics 2021 to 2022 .  ↩

QS (2024) QS World University Rankings by Subject 2024: Life Sciences & Medicine .  ↩

United Nations Trade and Development (2024) Services (BPM6): Exports by Service Category, Trade Partner World, 2023 .  ↩

For example: Deloitte (2024) Deloitte CFO Survey Q2 2024 .  ↩

Coyle and Muhtar (2021) UK ’s Industrial Policy Learning from the Past .  ↩

Coyle and Muhtar (2022) You’re Not Speaking my Language .  ↩

Deloitte (2024) Deloitte CFO Survey Q2 2024 .  ↩

Office for Budget Responsibility (2024) Fiscal Risks and Sustainability Report .  ↩

Organisation for Economic Cooperation and Development (2022) Value for Money in School Education, Chapter on The Importance of Human Capital for Economic Outcomes .  ↩

Department for Education (2024) Skills England: Driving Growth and Widening Opportunities .  ↩

Organisation for Economic Cooperation and Development (2022) Skills for Jobs .  ↩

Department for Education (2023) Employer Skills Survey, 2022 .  ↩

Department for Education (2019) Higher Technical Education: The Current System and the Case for Change .  ↩

Organisation for Economic Cooperation and Development (2020) Raising the Basic Skills of Workers in England .  ↩

UK Government (2024) Analysis of Geographical Disparities .  ↩

Chartered Institute of Personnel and Development (2023) Improving UK Management Capability .  ↩

Office for National Statistics (2024) Economically Inactive: UK .  ↩

Learning and Work Institute (2024) Why 2024 Should be a Year for Employer Investment in Training .  ↩

The Prince’s Responsible Business Network (2022) Rebooting Lifelong Learning for a Skilled Workforce .  ↩

QS (2025) World University Rankings 2025: Top Global Universities .  ↩

Beauhurst / Royal Academy of Engineering (2024) Spotlight on Spinouts 2024 .  ↩

Global University Venturing (2023) .  ↩

Organisation for Economic Cooperation and Development (2024) ICT Access and Usage by Businesses .  ↩

Be the Business (2023) G7 Productive Business Index .  ↩

Organisation for Economic Cooperation and Development (2020) Laggard firms, Technology Diffusion and its Structural and Policy Determinants .  ↩

Catapult Network (2023) Growth and Prosperity Stories .  ↩

Department for Science, Innovation and Technology (2023) Business Data Use and Productivity Study (wave 1) .  ↩

The range highlights the synergies among data capital efficiency and an economy’s capability for digital transformation of its production processes. It should also be noted that at least some of these gains are already being captured by the UK economy.  ↩

European Union (2023) European Data Market Study 2021-2023 .  ↩

Department for Science, Innovation and Technology (2024) UK Business Data Survey 2024 .  ↩

Bidwells (2024) Cambridge Databook Offices and Labs January 2024 .  ↩

Boston Consulting Group (2024) Reshaping British Infrastructure: Global Lessons to Improve Project Delivery .  ↩

Centre for Cities (2021) Measuring Up .  ↩

HM Treasury (2010) Infrastructure Cost Review .  ↩

Department For Transport (2017) Transport Infrastructure Efficiency Strategy .  ↩

PwC (2016) High Speed Rail International Benchmarking Study .  ↩

Department for Energy Security and Net Zero (2022) Electricity Networks Strategic Framework: Enabling a Secure, Net Zero Energy System .  ↩

HM Government (2008) Climate Change Act .  ↩

HM Government (2023) Carbon Budget Delivery Plan .  ↩

HM Government (2024) Policy Statement on Onshore Wind .  ↩

HM Government (2024) Solar Taskforce Meets in Drive for Clean Power .  ↩

HM Government (2024) Government Secures Record Pipeline of Clean Cheap Energy Projects .  ↩

HM Government (2024) Government Reignites Industrial Heartlands 10 Days Out from the International Investment Summit .  ↩

HM Government (2024) New Great British Energy Partnership Launched to Turbocharge Energy Independence .  ↩

Department for Energy Security and Net Zero (2024) International Industrial Energy Prices . Quarterly: Industrial electricity prices in the EU for small, medium, large and extra large consumers (QEP 5.4.1 to 5.4.4).  ↩

Department for Energy Security and Net Zero (2024) International Industrial energy Prices . Quarterly: Industrial electricity prices in the EU for small, medium, large and extra large consumers (QEP 5.4.1 to 5.4.4).  ↩

Department for Energy Security and Net Zero (2024) Enabling Industrial Electrification: A Call for Evidence .  ↩

Competition and Markets Authority (2022) The State of UK Competition Report .  ↩

Organisation for Economic Cooperation and Development (2021) Methodologies to Measure Market Competition .  ↩

HM Treasury (2019) Unlocking Digital Competition, Report of the Digital Competition Expert Panel .   ↩

‘Scale economies’ describe the cost advantages that firms obtain as their volume of output grows, as their per unit fixed costs fall; ‘lock-in effects’ refer to a situation in which consumers are dependent on a single manufacturer or supplier for a specific good or service; ‘network effects’ describe a scenario in which the value of a product increases with the number of consumers who use it. These are all common in digital platforms such as online marketplaces, for example.  ↩

Department for Business and Trade (2024) Summary of Findings from the Call for Evidence , House of Lords (2024) Who Watches the Watchdogs? .  ↩

Frontier Economics (2024) Accelerating Progress Towards Climate and Policy Goals Through Environmental Regulation .  ↩

Department for Business and Trade (2023) Harrington Review of Foreign Direct Investment .  ↩

British Business Bank analysis of Pitchbook data, 2021-2023.  ↩

Oliver Wyman (2024) Accelerating Regional Growth .  ↩

London Stock Exchange Group (2024) London Stock Exchange’s Equity Capital Markets Update – Q2 2024 .  ↩

The UK and France have 10% corporation tax on income from qualifying intellectual property, lower than other G7 countries while Canada and Germany have no equivalent treatment. Organisation for Economic Cooperation and Development (2024) Corporate Tax Statistics Database .  ↩

HM Treasury (2024) Public Expenditure Statistical Analyses 2024 .  ↩

Office for National Statistics (2024) Balance of Payments April to June 2024 .  ↩

Newfarmer and Sztajerowska (2012) Trade and Employment in a Fast-Changing World, in Organisation for Economic Cooperation and Development (2012), Policy Priorities for International Trade and Jobs, Douglas Lippoldt (ed.), See also Organisation for Economic Cooperation and Development (2018) Market Opening, Growth and Employment .  ↩

Office for National Statistics (2018) UK Trade in Goods and Productivity: New Findings .  ↩

The productivity of exporting firms is based on correlation analysis and do not indicate the direction of causation.  ↩

Trade intensity looks at a country’s exports plus imports as a share of GDP and considers the country’s share of trade relative to the average for its region.  ↩

Office for National Statistics (2024) GDP Quarterly National Accounts April to June 2024 .  ↩

Department for Business and Trade (2024) Number of Exporting Registered Businesses in the UK , 2016-2022.   ↩

Department for Business and Trade (2023) National Survey of Registered Businesses’ Exporting Behaviours, Attitudes and Needs.   ↩

Organisation for Economic Cooperation and Development (2024) Making the Most Out of Digital Trade in the United Kingdom .    ↩

Foreign, Commonwealth & Development Office (2024) UK - EU Trade and Cooperation Agreement, UK Domestic Advisory Group: 2024 to 2025 priorities report .  ↩

International Monetary Fund (2022) Customs Matters: Strengthening Customs Administration in a Changing World .  ↩

Centre for Cities (2021) So You Want to Level Up?   ↩

Department for Science, Innovation and Technology (2023) The Innovation Clusters Map from the Department for Science, Innovation and Technology .  ↩

Rodrik (2004) Industrial Policy for the Twenty-First Century .  ↩

Rodrik (2008) Industrial Policy: Don’t Ask Why, Ask How .  ↩

Mazzucato (2021) Mission Economy: A Moonshot Guide to Changing Capitalism.  ↩

Institute for Public Policy Research (2024) Making Markets: The City’s Role in Industrial Strategy .  ↩

The Productivity Institute (2023) A New UK  Policy Institution for Growth and Productivity – A Blueprint .  ↩

Centre for Economic Performance (2024) A New Approach for Better Industrial Strategies .  ↩

Institute for Government (2024) 10 Lessons for Successfully Restarting an Industrial Strategy .  ↩

The Productivity Institute (2023) A New  UK  Policy Institution for Growth and Productivity – A Blueprint .  ↩

Short-term factors include economic shocks, which can have persistent impacts on growth through ‘scarring effects’. Longer-term factors include trends such as changing patterns of globalisation, which shape the international context UK firms operate in. Structural factors include characteristics such as the underlying drivers of the UK ’s economic specialisation.  ↩

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