Economic growth has been the cornerstone of Rachel Reeves’ strategy ever since she became chancellor last July.
“The UK has some of the most innovative businesses in the world and our Plan for Change has provided them with the stability they need to grow and for more to be created,” Reeves said on the launch of the UK’s modern industrial strategy on 23 June.
This strategy, Reeves continued, “builds on that progress with a ten-year plan to slash barriers to investment… it will boost our economy and create jobs that put more money in people’s pockets.”
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“The industrial strategy is an important step towards the development of a positive and coherent plan to drive growth, and will enable businesses to see a sense of direction for the UK economy,” said Anna Leach, chief economist at the Institute of Directors.
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Leach warned, though, that there is still work for Reeves to do in order to promote growth. “The tax and regulatory system, employment regulations, overall energy cost competitiveness and the depth of our relationships with global markets are all fundamental to creating the right conditions for investment,” she said.
Economic growth has been elusive for the UK economy since Reeves took office. Growth looked to be picking up in the opening months of 2025, but ‘awful April’ saw a string of new measures announced in October’s Autumn Budget come into effect.
Experts had warned that many of these policies could be anti-growth, and so it appeared to be, as the UK economy contracted 0.3% during the month.
While the UK may not fall into recession, few experts expect more than 1% or so growth this year.
There is little the Bank of England (BoE) can do to help Reeves. Inflation remains stubbornly high at around 3.4%, meaning the BoE is limited in the pace at which it can cut interest rates, which would theoretically spur further growth at the cost of faster inflation.
How will the industrial strategy seek to change this narrative and will it be effective?
How is Rachel Reeves trying to boost UK growth?
The modern industrial strategy aims to create a friendlier environment for British and overseas companies to do business in the UK. As well as identifying eight key industries, the industrial strategy focuses on ways of cutting costs for key businesses and facilitating investment.
Here are some of the key features of the industrial strategy Reeves hopes will boost UK growth.
Electricity price relief
The industrial strategy report identifies one of the biggest drags on the UK economy; the high cost of electricity in the country, “significantly higher than those in most competing economies”.
Under the modern industrial strategy, a new British Industrial Competitiveness Scheme will reduce electricity bills by up to £40 per megawatt hour for over 7,000 electricity-intensive businesses from 2027. This is estimated to wipe 25% off the energy bills of these businesses which operate in sectors like automotive, aerospace and chemicals.
“UK manufacturers have been at a huge disadvantage against global competitors for decades due to the significantly higher energy costs they pay,” said Lucinda O'Reilly, director at The International Trade Consultancy.
While broadly supportive of efforts to reduce the UK’s stifling energy costs, some business leaders have criticised the limited scope of these proposals.
“I'm sure almost everyone in the country would want electricity costs to be slashed by 25%, not just 7,000 lucky businesses,” said Pete Mugleston, managing director at Online Mortgage Advisor.
Clean and fusion energy
Longer term, Reeves’ plan for growth clearly revolves around a greater degree of energy security, with novel forms of power generation taking centre stage.
In broad terms, that means putting more weight behind attempts to develop the country’s clean energy infrastructure. The government hopes to double current investment levels into clean energy industries to over £30 billion per year by 2035, following announcements in the Spending Review that will see billions invested into nuclear power and carbon capture.
The latest announcement pledged a further £700 million for Great British Energy to invest in clean energy supply chains.
Want to add some clean energy investments to your portfolio? Read our explainer on the top sustainable funds.
There will also be £2.5 billion invested over five years into the UK’s fusion energy sector specifically, with the STEP (Spherical Tokamak for Energy Production) programme front and centre. Fusion energy mimics the physical processes that take place inside stars by fusing two light atomic particles together, releasing energy, inside a ‘tokamak’ – a reactor that is specially designed to hold the superheated elements involved in the reaction.
“The UK is at the forefront of global fusion energy research, and STEP is the flagship initiative poised to transform that leadership into commercial reality,” said Paul Methven, CEO of UK Industrial Fusion Solutions, the organisation behind STEP.
AI investment
Outside energy the industrial strategy also hopes to harness artificial intelligence (AI) technology in order to boost UK productivity. Five AI and technology programmes will share £150 million of investment in order to boost professional services like law, management consulting and accountancy.
Five new centres of excellence will be created across the country in order to help businesses grow and adopt new technology.
Reeves had previously pledged £2 billion of AI investment as part of the Spending Review.
As part of the industrial strategy, the government will invest £670 million into quantum computing over the next decade, with £500 million of this coming in the next four years.
"This is a big moment for quantum computing in the UK," said Steve Brierley, CEO of Riverlane, a Cambridge-based company that builds quantum error correction technology.
"The government’s £670 million commitment, including £500 million over the next four years, gives our sector the long-term backing it needs to plan, grow and deliver," Brierley added.
Will Reeves’ plan for growth be successful?
Specific details of the industrial strategy’s various components are being announced piecemeal, so there is more information on the way, but some observers have highlighted shortcomings in the announcements that have been made so far.
“Investment in innovation and AI is encouraging, especially for tech-driven sectors, but we need to see support reach SMEs too, not just big firms,” said Mugleston. He added that while the government should be praised for its ambition, the problem with the strategy is that “it’s probably largely unachievable, especially if Labour lose the next election.”
Faisal Sheikh, managing director of Monmouth Capital, took aim at how reducing electricity costs for large businesses will work in practice. “The Government talks about slashing electricity bills as if it happens by magic,” he said. “Reading the detail, it's basically going to subsidise energy bills for a wide range of businesses.
“That does nothing to address the root causes of why the UK's energy costs are among the highest in the developed world.”
