Industrial Strategy - Building a Britain fit for the future

Over the last seven years, we have made huge progress in restoring our public finances and rescuing our economy from the brink of bankruptcy. Thanks to the sacrifices of the British people, the deficit is now down two-thirds since 2010, the unemployment rate is at its lowest in over 40 years and we have had 19 continuous quarters of economic growth.
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Industrial 
Strategy
Building a Britain fit for the future
Industrial Strategy White Paper
2
Contents
Foreword from the Prime Minister 
04
Foreword from the Secretary of State 
06
Introduction 
08
Grand Challenges 
30
Ideas 
56
People 
92
Infrastructure 
126
Business Environment 
162
Places 
214
Conclusion: Britain and the world 
240
Industrial Strategy White Paper
4
Foreword from the  
Prime Minister
Over the last seven years, we have made huge progress in 
restoring our public finances and rescuing our economy from the 
brink of bankruptcy. Thanks to the sacrifices of the British people, 
the deficit is now down two-thirds since 2010, the unemployment 
rate is at its lowest in over 40 years and we have had 19 
continuous quarters of economic growth. 
We should take enormous pride in 
these achievements and the difference 
they are making for many families and 
businesses in our country. But at the 
same time, we must also recognise 
there are some communities which 
have struggled to keep pace with 
changes in the global economy and as a 
result not fully shared in the prosperity 
that growth has delivered. 
For me it is not enough to see growth 
in the national economy if your 
local economy is shrinking. It is not 
ambitious enough to have record jobs 
growth, unless those jobs are secure 
and delivering real growth in wages. 
And we are not fulfilling Britain’s 
potential if, despite having scientists 
and universities renowned the world 
over, we cannot turn their ideas into 
the products and services on which the 
industries of the future will be built. 
That is why one of my first actions 
as Prime Minister was to begin the 
development of a modern Industrial 
Strategy that would help businesses to 
create high quality, well paid jobs right 
across the country. This document is 
a vital step in delivering that vision. 
More than just a set of announcements, 
it heralds a new approach to how 
government and business can work 
together to shape a stronger, fairer 
economy. At its heart it epitomises my 
belief in a strong and strategic state 
that intervenes decisively wherever it 
can make a difference. It is rooted in 
the conviction that a successful free-
market economy must be built on firm 
foundations: the skills of its workers, the 
quality of the infrastructure, and a fair 
and predictable business environment. 
And where these are missing it takes 
energy and partnership between 
government and the private sector to 
address the problems. 
  5
That is exactly what this Industrial 
Strategy aims to do. It will help young 
people develop the skills they need to 
do the high-paid, high-skilled jobs of the 
future. It backs our country for the long-
term: creating the conditions where 
successful businesses can emerge and 
grow, and helping them to invest in the 
future of our nation. And it identifies 
the industries that are of strategic value 
to our economy and works to create 
a partnership between government 
and industry to nurture them. In doing 
so, it will help propel Britain to global 
leadership of the industries of the 
future - from artificial intelligence  
and big data to clean energy and  
self-driving vehicles.
Two centuries ago it was our industrial 
revolution which led the world. Thirty 
years ago, it was our bold, pro-market 
reforms which set an example for 
others to follow. Today, our ambition is 
just as high. As we leave the European 
Union and forge a new path for 
ourselves, so we will build a Britain fit 
for the future and fulfil the mission that 
I set on my first day as Prime Minister: 
to make our United Kingdom a country 
that truly works for everyone. 
The Prime Minister
6 
Industrial Strategy White Paper
Foreword from  
the Secretary of State
We are at one of the most important, exciting and challenging 
times in the history of global enterprise. 
Powered by new technologies, the way 
we live our lives as workers, citizens and 
consumers is being transformed across 
the world. 
Britain is extraordinarily well-placed 
to benefit from this new industrial 
revolution. We are an open enterprising 
economy, built on invention, innovation 
and competition. Our universities and 
research institutions are among the 
best in the world. We have a deserved 
reputation for being a dependable 
and confident place to do business, 
with high standards, respected 
institutions, and the reliable rule of 
law. We have achieved near historic 
levels of employment. We are a 
crossing point for the world because 
of our geographic position, the English 
language, our strong ties, our openness 
to ideas and our vibrant culture. We 
have many industries - from financial 
services to advanced manufacturing, 
from the life sciences to the creative 
industries – which are world leading. 
To benefit from the opportunities 
before us, we need to prepare to seize 
them. This would be needed at any 
time, and Britain’s decision to leave  
the European Union makes it even  
more important. 
More decisions about our economic 
future will be in our own hands,  
and it is vital that we take them. 
In our Industrial Strategy we set out 
how we will build on our strengths, 
extend them into the future and 
capitalise on the opportunities  
before us.
A serious strategy must also address 
the weaknesses that keep us from 
achieving our full potential. 
For all the excellence of our world-
beating companies, the high calibre 
of our workforce and the prosperity 
of many areas, we have businesses, 
people and places whose level of 
productivity is well below what  
can be achieved. 
By improving productivity while  
keeping employment high, we can 
earn more – raising living standards, 
providing funds to support our public 
services and improving the quality of 
life for all our citizens.
So this Industrial Strategy deliberately 
strengthens the five foundations 
of productivity: ideas, people, 
infrastructure, business environment 
and places.
As well as setting a path to  
improved productivity, our Industrial 
Strategy sets out four areas 
where Britain can lead the global 
technological revolution. 
These four Grand Challenges –  
in artificial intelligence and big data; 
clean growth; the future of mobility; 
and meeting the needs of an ageing 
society – have been identified on the 
advice of the our leading scientists and 
technologists. They will be supported 
by investment from the Industrial 
Strategy Challenge Fund and matched 
by commercial investment. 
Our Industrial Strategy will inform 
decisions now, and in the future. 
Other countries have benefited from 
establishing policies and institutions 
which endure. That is our aim. Through 
the consultation on our Green Paper, 
over 2,000 organisations from all 
parts of the United Kingdom have 
helped shape this strategy. 
That partnership with innovators, 
inventors, job creators, local leaders, 
the devolved administrations, workers 
and consumers will continue as we 
work together to make our country  
fit for the future.
 7
 
Rt Hon Greg Clark MP
Secretary of State for Business,  
Energy and Industrial Strategy
Industrial Strategy White Paper
8 
Introduction
 9
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Industrial Strategy White Paper
Overview: We will create an economy that boosts 
productivity and earning power throughout the UK
Our five foundations align to our vision for a transformed economy
5
foundations of 
productivity
Ideas 
the world’s most innovative economy
People 
good jobs and greater earning power for all
Infrastructure 
a major upgrade to the UK’s infrastructure
Business environment  
the best place to start and grow a business
Places  
prosperous communities across the UK 
We will set Grand Challenges to put the United Kingdom at the 
forefront of the industries of the future:
AI & Data Economy
We will put the UK at the forefront 
of the artificial intelligence and 
data revolution
Clean Growth
We will maximise the advantages 
for UK industry from the global 
shift to clean growth
Future of Mobility
We will become a world  
leader in the way people, goods 
and services move
Ageing Society
We will harness the power of 
innovation to help meet the needs 
of an ageing society
10
  11
Key policies include:
Ideas
`
`  Raise total research and development 
(R&D) investment to 2.4 per cent of 
GDP by 2027
`
`  Increase the rate of R&D tax credit  
to 12 per cent
`
`  Invest £725m in new Industrial Strategy 
Challenge Fund programmes to capture 
the value of innovation
People
`
`  Establish a technical education system 
that rivals the best in the world to 
stand alongside our world-class higher 
education system
`
`  Invest an additional £406m in maths, 
digital and technical education, helping 
to address the shortage of science, 
technology, engineering and maths 
(STEM) skills
`
`  Create a new National Retraining 
Scheme that supports people to re-skill, 
beginning with a £64m investment for 
digital and construction training
Infrastructure
`
`  Increase the National Productivity 
Investment Fund to £31bn, supporting 
investments in transport, housing and 
digital infrastructure
`
`  Support electric vehicles through 
£400m charging infrastructure 
investment and an extra £100m to  
extend the plug-in car grant
`
`  Boost our digital infrastructure 
with over £1bn of public investment, 
including £176m for 5G and £200m  
for local areas to encourage roll out  
of full-fibre networks
Business Environment
`
`  Launch and roll-out Sector Deals – 
partnerships between government 
and industry aiming to increase sector 
productivity. The first Sector Deals are 
in life sciences, construction, artificial 
intelligence and the automotive sector
`
`  Drive over £20bn of investment 
in innovative and high potential 
businesses, including through 
establishing a new £2.5bn Investment 
Fund, incubated in the British  
Business Bank
`
`  Launch a review of the actions that 
could be most effective in improving the 
productivity and growth of small and 
medium-sized businesses, including how 
to address what has been called the 
‘long tail’ of lower productivity firms
Places
`
`  Agree Local Industrial Strategies that 
build on local strengths and deliver on 
economic opportunities
`
`  Create a new Transforming Cities  
fund that will provide £1.7bn for  
intra-city transport. This will fund 
projects that drive productivity by 
improving connections within  
city regions
P̀rovide £42m to pilot a Teacher 
Development Premium. This will test 
the impact of a £1000 budget for  
high-quality professional development 
for teachers working in areas that  
have fallen behind
`  
We will ensure our Industrial Strategy will endure by creating an 
independent Industrial Strategy Council that will assess our progress  
and make recommendations to the government.
Industrial Strategy White Paper
12
The challenge for the future
The United Kingdom is a successful, competitive, open economy. 
We have many strengths on which 
we can build, and some weaknesses 
we need to address. As we leave the 
European Union we need to raise 
our game at home and on the world 
stage. This can be done if we seize the 
opportunities of the years ahead – and 
it is essential if the British people are 
to enjoy prosperous lives with fulfilling 
work and high quality public services. 
At the same time, the world is changing 
in fundamental ways. Technological 
innovations are transforming how we 
live and work. The proportion of older 
people in our society is growing. The 
way we generate and use energy is 
changing rapidly. 
The Industrial Strategy sets out how 
we are building a Britain fit for the 
future – how we will help businesses 
create better, higher-paying jobs in 
every part of the United Kingdom with 
investment in the skills, industries and 
infrastructure of the future. It ensures 
that our country and its citizens 
can embrace and benefit from the 
opportunity of technological change. 
Technological innovations are transforming how we live and work
  13
Our vision is for:
`
`  the world’s most innovative economy
`
`  good jobs and greater earning  
power for all
`
`  a major upgrade to the UK’s 
infrastructure
`
`  the best place to start and grow  
a business
`
`  prosperous communities across  
the UK 
To achieve this, we must ensure 
every part of our country realises its 
full potential. We are taking action 
now, including making the biggest 
ever increase in public investment in 
research and development, establishing 
a new fund to drive productivity by 
improving connections within city 
regions, and agreeing Sector Deals 
which will drive transformation in 
investment and productivity across  
the economy.
This Industrial Strategy is for the long 
term. It provides a policy framework 
against which major private and public 
sector investment decisions can be 
made with confidence. It is a strategy 
that is being implemented with, not 
just for, British enterprise – with the full 
involvement of innovators, investors, 
job creators, workers and consumers  
in England, Scotland, Wales and 
Northern Ireland.
It is also a strategy that recognises and 
respects the devolution settlements of 
Scotland, Wales and Northern Ireland. 
With many of the policies that can 
drive productivity being devolved, it 
is a strategy that necessarily brings 
our work together with that of the 
devolved administrations as we work 
in partnership to get the best possible 
outcome for every part of the UK. 
The strategy set out in this paper is the 
work of many people, businesses, local 
leaders and institutions. It builds on 
nearly 2,000 formal responses to the 
public consultation on our Green Paper, 
Building our Industrial Strategy1, from 
all types of organisation, sectors of the 
economy, groups of businesses and 
individuals – and many thousands of 
contributions through our programme 
of engagement throughout the UK over 
the last 10 months.
Industrial Strategy White Paper
14
Our approach
Our consultation reinforced the importance of five foundations 
of productivity – the essential attributes of every successful 
economy.
These are Ideas, People, 
Infrastructure, Business Environment 
and Places. Our focus on them 
responds to the detailed feedback to 
the Green Paper.
Our five foundations align to our 
vision for a transformed economy – a 
transformation that is already taking 
place and will accelerate over the 
course of the coming decades:
.
Our five foundations
Ideas
the world’s most innovative 
economy
People
good jobs and greater 
earning power for all
Infrastructure
a major upgrade to the UK’s 
infrastructure
Business Environment
the best place to start and 
grow a business
Places
prosperous communities 
across the UK 
Through this process we have also 
identified Grand Challenges which we 
will set for the UK government and 
wider economy. These are in response 
to global forces that will shape our 
rapidly changing future, and which the 
UK must embrace to ensure we harness 
all the opportunities they present. The 
Grand Challenges commit to:
`
`  put the UK at the forefront of the 
artificial intelligence and data 
revolution; 
`
`  maximise the advantages  
for UK industry of the global  
shift to clean growth;
`
`  become a world leader in shaping  
the future of mobility; and
`
`  harness the power of innovation  
to help meet the needs of an  
ageing society.
Our foundations and Grand Challenges 
are set out in the sections that follow. 
This strategy also refers to a number of 
policies that will be added to over time 
to support the foundations and drive 
the UK’s transformation. 
  15
We will:
Ideas
`
`  raise total research and development 
(R&D) investment to 2.4 per cent of 
GDP by 2027;
`
`  increase the rate of R&D tax credit  
to 12 per cent;
`
`  invest £725m in new Industrial 
Strategy Challenge Fund programmes 
to capture the value of innovation;
People
`
`  establish a technical education system 
that rivals the best in the world to 
stand alongside our world-class higher 
education system;
`
`  invest an additional £406m in maths, 
digital and technical education, 
helping to address the shortage of 
science, technology, engineering and 
maths (STEM) skills;
`
`  create a new National Retraining 
Scheme that supports people 
to re-skill, beginning with a 
£64m investment for digital and 
construction training;
Infrastructure
`
`  increase the National Productivity 
Investment Fund to £31bn, supporting 
investments in transport, housing and 
digital infrastructure; 
`
`  support electric vehicles through 
£400m charging infrastructure 
investment and an extra £100m to 
extend the plug-in car grant;
`
`  boost our digital infrastructure with 
over £1bn of public investment, 
including £176m for 5G and £200m 
for local areas to encourage roll out  
of full-fibre networks;
Business Environment
`
`  launch and roll-out Sector Deals – 
partnerships between government 
and industry aiming to increase sector 
productivity. The first Sector Deals 
are in life sciences, construction, 
artificial intelligence and the 
automotive sector;
`
`  drive over £20bn of investment 
in innovative and high potential 
businesses, including through 
establishing a new £2.5bn Investment 
Fund, incubated in the British  
Business Bank;
 ̀launch a review of the actions that 
could be most effective in improving 
the productivity and growth of 
small and medium-sized businesses, 
including how to address what has 
been called the ‘long tail’ of lower 
productivity firms;
`
Industrial Strategy White Paper
16
Places
`
`  agree Local Industrial Strategies that 
build on local strengths and deliver on 
economic opportunities; 
`
`  create a new Transforming Cities fund 
that will provide £1.7bn for intra-city 
transport. This will fund projects 
that drive productivity by improving 
connections within city regions; and
`
`  provide £42m to pilot a Teacher 
Development Premium. This will test 
the impact of a £1000 budget for 
high-quality professional development 
for teachers working in areas that 
have fallen behind. 
These policies, alongside the many 
others set out in this document, are the 
first strategic actions of a long-term 
approach to transform our levels of 
productivity and our earning power  
as a nation, as businesses, as places, 
and as individuals. We are ready to 
be judged on our performance in 
implementing them.
We will agree Local Industrial Strategies that identify 
and build on strengths across the country
  17
Building on our strengths
The UK is a fundamentally strong economy, with widely admired 
institutions and some of the world’s leading businesses and 
universities. 
We have some of the highest 
employment rates in Europe2. We are 
a location of choice for businesses at 
the cutting edge of innovation and 
technology, attracting more overseas 
investment in R&D than many major 
countries, including Germany,  
France and China3. 
Our flexible labour market, high levels 
of employment and competitive 
environment – with high standards and 
a dependable rule of law – make us a 
great place to do business. 
Source: United Nations Conference on Trade and Development (2017) World Investment 
Report 2017
Inward foreign direct investment 
$400
$300
$200
$100
$0
UK inward investment compared to other countries
USD billions2016
2007
USAUKChinaHong KongNetherlandsSingaporeBritish Virgin IslandsBrazilAustraliaCayman IslandsIndiaRussian FederationCanadaBelgiumItaly
Industrial Strategy White Paper
18
We are ranked seventh globally in the 
World Bank’s Ease of Doing Business 
Index4. Our strengths are many and 
diverse: from our scientific and financial 
prowess to the vitality of our cultural 
and artistic life. 
We have many creative and innovative 
businesses and we are strong in 
key sectors, from automotive and 
aerospace to food and drink and 
creative industries. We have millions 
of jobs in financial, professional and 
business services, which are also our 
country’s biggest exporters5. We are 
at the cutting edge of technologies 
such as satellites and synthetic 
biology. Countries are keen to invest 
in our education and learn from our 
discoveries in health care. The UK ranks 
in the top five in the Global Innovation 
Index6. We need to make the most of 
these strengths so that we can be at the 
forefront of emerging technologies and 
industries in the years ahead.
The UK also contains some of the 
world’s most attractive places to 
live, work, invest and be entertained. 
London is a world-leading hub for 
financial services, creative industries, 
tech businesses and more; a global 
city which continues to be a magnet 
for international businesses and talent. 
In recent years the UK’s ‘Core Cities’, 
including Birmingham, Manchester and 
Glasgow7, have seen their economies 
transformed, while many smaller cities 
and towns such as Milton Keynes, 
Oxford and Cambridge have been 
hotspots for job creation. We must 
promote growth through fostering 
clusters and connectivity across cities, 
towns and surrounding areas.
  19
Addressing our weaknesses
For all these strengths, we have an urgent need to improve. In 
recent decades we have not made the most of our export potential, 
invested too little, and have not nurtured some of the skills we need. 
Too many of the UK’s cities outside 
the capital underperform against 
the national average. We cannot 
tackle our problems unless we openly 
acknowledge them and accept we  
all share the responsibility for 
addressing them. 
Our analysis and the responses to our 
Green Paper point to some important 
weaknesses in the UK economy that we 
are determined, unflinchingly,  
to correct. 
In particular, Britain’s productivity 
has long lagged behind that of our 
competitors8. At a time of astonishing 
technological advance, output per hour 
worked in the British economy has been 
weak since the financial crisis9. 
Source: Data based on analysis of ONS national accounts and ASHE data (courtesy of Professor  
Paul Gregg, the University of Bath). *Hourly earnings is defined as mean compensation per 
employee hour. 
Hourly earnings and output per hour, index: 1993=100
 150
 140
 130
 120
 110
 100
 90
 80
 70
 60
 50 
 Hourly earnings 
 Output per hour 
 2015 
 2010 
 2005 
 2000 
 1995 
 1990 
 1985 
 1980 
 1975 
Rising wages depend on growing productivity
Industrial Strategy White Paper
20
We are proud of our flexible labour 
market that has delivered jobs for 
millions and we have achieved near 
record employment rates10, but this 
must now be accompanied by the 
sustained higher productivity that is 
the essential requirement for higher 
wages. Unless we improve productivity 
while holding on to high employment, 
we cannot raise living standards and 
quality of life for all our citizens.
Our relatively weak productivity 
performance is, to a significant degree, 
a problem of composition:  
we have some of the most productive 
businesses, people and places in 
the world but also a ‘long tail’ of 
underperformance. Britain’s top 
businesses are among the most 
admired in the world, but if the long  
tail of lower productivity persists,  
it will hold back UK growth, wages  
and living standards11. 
By addressing the disparities we can 
improve our overall productivity and 
earning power.
Taking action now
These are challenges that have been recognised by previous 
governments - we can learn from their successes as well as try to 
avoid their mistakes. 
We successfully rebuilt our automotive 
industry by deliberately attracting 
investment from abroad, notably from 
Japan and more recently from India 
and continental Europe. 
The initiatives of previous governments 
such as the advanced manufacturing 
strategies, the Eight Great 
Technologies, and the Catapult network 
have all contributed to our international 
reputation. These are strengths we 
can draw on and they present further 
opportunities to improve productivity 
and create good new jobs. The very 
speed of technological change and 
the convergence of technologies 
present enormous opportunities. 
We are a nimble economy and we 
can move quickly to take advantage 
of innovations. We also have smart 
consumers who reward entrepreneurs 
developing new products and services. 
We know that the earliest adopters of 
new technologies are able to reap the 
greatest rewards in terms of additional 
jobs and increased revenue.
  21
GDP per hour worked, 2016, index: UK=100
 Germany 
 France 
 US 
 Italy 
 UK 
 Canada 
 Japan 
 40 50 60 70 80 90 
100 
110 
120 
130 
140 
 Country UK productivity relative to other G7 countries
The role of government
We have learned from previous attempts at industrial strategy – 
what has worked, and what has not.
It is important to have a clear 
understanding of what a government 
can and cannot do. We believe 
in the power of the competitive 
market - competition, open financial 
markets, and the profit motive are 
the foundations of the success of the 
UK. Indeed the best way to improve 
productivity is to increase exposure  
to competition.
But governments have a responsibility 
that extends beyond promoting 
competition. We have to work 
systematically through the factors 
responsible for higher productivity and 
earning power – the five foundations of 
Ideas, People, Infrastructure, Business 
Environment and Places that are central 
to this White Paper. 
Source: ONS (2017) International Comparisons of Labour Productivity.
Industrial Strategy White Paper
22
Governments in successful economies 
have recognised their strategic 
power and leadership role, allowing 
them to coordinate and convene 
efforts to develop and disseminate 
new technologies and industries. 
Individuals, businesses and researchers 
are motivated by ambitious missions 
– global and national challenges that 
need to be tackled by breaking down 
traditional barriers and finding new 
ways of doing things. From sequencing 
the human genome and tackling Aids 
to hosting the 2012 Olympics, we have 
seen successive governments identify 
ambitious missions that drive new 
endeavours.
Governments can make long-term 
investment that no single commercial 
or academic player can take alone. 
The modern nation state is the most 
powerful means we have of pooling  
risk. We are willing to take these risks, 
which means accepting not all will  
work out successfully. An industrial 
strategy that avoids risk is no  
industrial strategy at all. 
We have studied previous attempts 
at industrial strategy, which have had 
successes as well as failures. One lesson 
is that governments cannot do this 
on their own, instructing and planning 
but never listening or consulting. So 
our Industrial Strategy is a partnership 
with businesses, workers, universities 
and colleges, local government and 
the devolved administrations where we 
work together to achieve our goals. 
From sequencing the human genome to hosting the London 2012 
Olympic and Paralympic Games, we have seen successive governments 
identify ambitious missions that drive new endeavours
  23
Grand Challenges
It is not enough just to look at the economy we have. We must 
make preparations for the economy we need to become. 
We need to be acutely aware and 
take advantage of the world-changing 
trends which will shape Britain in the 
decades ahead. This is where the 
government must provide the strategic 
leadership set out above to support the 
development of new technologies and 
position the UK at the forefront of the 
industries of the future. 
In this Industrial Strategy we propose a 
number of Grand Challenges. These are 
developments in technology that are 
set to transform industries and societies 
around the world, and in which the  
UK – if we muster our forces across 
sectors – has the opportunity to play  
a leading global role. 
These Grand Challenges are an 
invitation to business, academia 
and civil society to work together to 
innovate and develop new technologies 
and industries in areas of strategic 
importance to our country. We set them 
out in more detail in the next chapter.
Following extensive consultation during the consultation for our 
Green Paper, our four Grand Challenges will be:
 putting the UK at the forefront 
of the artificial intelligence  
and data revolution;
maximising the advantages  
for UK industry from the 
global shift to clean growth;
 being a world leader in shaping 
the future of mobility; and 
 harnessing the power  
of innovation to help meet the 
needs of an ageing society. 
Industrial Strategy White Paper
24
Global Britain
The decision to leave the European Union was not a decision to 
retreat from the world.
In fact we need to embrace it – to trade 
more not less. We must remain an open, 
liberal market economy. There are 
opportunities to be gained upon leaving 
the EU. The opportunity to become 
more protectionist is not one of them. 
Britain’s future has to be one of free 
trade with the whole world, including 
with the rest of Europe.
The EU accounts for the largest 
proportion of UK trade12. The size  
and proximity of the EU single market 
and our close connections with it  
mean the EU will always be a major 
trading partner. 
The government believes it is 
overwhelmingly in our mutual interest 
to agree a comprehensive and 
ambitious UK-EU economic partnership 
that enables the most free and 
frictionless trade possible with minimal 
disruption to business. We should be 
optimistic and ambitious about what 
we can achieve, as we share the same 
beliefs in free trade, rigorous and fair 
competition, strong consumer rights 
and high standards. 
There will, inevitably, be uncertainty 
while we determine the precise nature 
of our future trading arrangement with 
Britain’s future has to be one of free trade
  25
the EU. To minimise this, we are seeking 
to agree an implementation period, of 
around two years, to allow business 
time to adapt to the new arrangements. 
This will ensure that no one has to go 
through two sets of changes, and will 
allow businesses to make decisions 
once there is greater certainty about 
the final outcome. 
Our Industrial Strategy is designed 
to place us at the forefront in finding 
solutions to both UK and global 
emerging trends and challenges. As 
set out in our paper Preparing for 
Our Future Trade Policy13, we will 
reach out to old friends and new 
allies in expanding access to markets, 
supporting our businesses to export, 
and welcoming investment and 
collaboration from emerging and 
established partners from across the 
globe. The International Monetary 
Fund projects that above 80 per cent 
of world growth is likely to come from 
outside the EU in the near future14; we 
need to be ready for the opportunities 
such growth will bring. We are in 
discussions with a number of countries 
about future options, including full Free 
Trade Agreements. But Free Trade 
Agreements are not the only tools  
at our disposal. 
We aim to put in place mechanisms  
to improve trading relations and remove 
barriers affecting UK businesses, and 
we will work closely with the devolved 
administrations as we forge new and 
deeper trade relationships around  
the world.
Our Industrial Strategy will be flexible 
to take account of developments in 
negotiations between the UK and the 
EU or changes in the global economy. 
While our Industrial Strategy will 
adapt, we will always be consistent in 
maintaining the principles of an open 
economy and fair competition that 
creates the conditions for businesses  
to thrive. 
Industrial Strategy White Paper
26
Partnership with the devolved administrations
The truly generational challenges and opportunities to which our 
Industrial Strategy responds apply throughout the UK. 
In addressing these issues we recognise 
and respect the devolution settlement 
and the empowerment it has offered 
the people of Scotland, Wales and 
Northern Ireland. There are important 
aspects of the five foundations of 
Ideas, People, Infrastructure, Business 
Environment, and Places that are 
associated with policies that are 
devolved, and we are committed to 
working in partnership across all four 
nations to reach the best possible 
outcome for every part of the UK.
Our Union offers a unique opportunity. 
The UK government and the devolved 
administrations can each learn from 
each other in areas of common interest. 
For example, Scotland has made great 
strides in energy efficiency and has 
one of the most effective systems for 
translating advances in life sciences 
into improved patient care. Wales’s 
Sêr Cymru programme is attracting 
leading scientific talent matched to its 
innovation strengths. Northern Ireland 
is fostering a burgeoning cybersecurity 
business and research community.
Wales’s Sêr Cymru programme is designed to attract the highest calibre 
candidates to work in research groups in Welsh universities, such as Cardiff
  27
Devolution has never meant that the 
UK government does not exist to serve 
the people and the economies of the 
devolved nations. This is exemplified 
in the funding we provide throughout 
the UK to support innovation 
excellence, and next generation digital 
infrastructure to connect urban and 
rural communities, and in the promotion 
of our national strengths as part of the 
GREAT campaign.
We also know that it is collaboration 
between our governments that results 
in some of the most powerful actions 
taken within the devolved nations. The 
six City Deals agreed in Scotland and 
Wales are testament to the impact 
that partnerships within the devolved 
nations can achieve. These deals 
have yielded ambitious investments 
driven by priorities identified by 
communities themselves, with a £1.6bn 
UK government investment bringing 
forward more than £3bn in funding 
from other partners. And we remain 
committed to further ambitious City 
and Growth Deals across Wales, 
Northern Ireland and Scotland.
The Scottish Government and the 
previous Northern Ireland Executive 
have also recently published industrial 
and economic strategies and the Welsh 
Government is to do the same in the 
coming weeks. 
These publications reflect ambitious 
thinking for each economy and identify 
priorities that align fundamentally with 
the five foundations of this Industrial 
Strategy, whether in Scotland’s focus 
on innovation and entrepreneurship 
or Northern Ireland’s emphasis on 
inclusive growth.
In our Green Paper we committed 
to working with the devolved 
administrations as part of ministerial 
forums. This joint working has proven 
valuable, and as we implement our 
long-term strategy we will recommit 
to that partnership, seeking to tackle 
our shared opportunities with a focus 
on: addressing our shared Grand 
Challenges; making Sector Deals work 
for businesses across the UK; ensuring 
that our institutions collaborate for 
maximum impact; and working together 
on priorities for places.
Industrial Strategy White Paper
28
A strategy for the long term, with benefits now
The responses to the consultation showed us that people and 
business want confidence that our Industrial Strategy will endure 
– that it is a framework they can use for decision making and that 
it can be expected to last. 
The best way to secure this is for 
the strategy to command the widest 
possible support. We must earn this 
through the quality of the decisions we 
take and by sharing the evidence on 
which they are based. Yet commitment 
must not mean inflexibility – we need 
systems that adjust to new evidence 
and new challenges. 
One key to this is data. Governments 
must practise what they preach about 
the opportunities of the data revolution. 
That means being innovative in how 
we collect and analyse economic data. 
To support evaluation and further 
understanding of the economy, we aim 
to make the UK the best understood 
major economy. We will be developing 
a joint programme of work with the 
Office for National Statistics, academics 
and other stakeholders that will identify 
the gaps in our evidence base. The UK 
government also stands ready to work 
with the devolved administrations, 
where appropriate, to ensure the 
strongest possible data is held and 
used across the UK; in particular as we 
continue to transfer powers from the 
 29
UK to the Scottish Parliament in line 
with the Scotland Act 2016. We want to 
make more micro-level data available 
so people can study and understand 
our economy. This will enable us to 
improve significantly how we identify 
strengths and weaknesses in specific 
parts of the country. It will provide a 
shared evidence base on which we 
can build our Industrial Strategy.
We must have the right reporting 
mechanisms in place to ensure we 
achieve our ambitions. The Economy 
and Industrial Strategy Cabinet 
Committee, chaired by the Prime 
Minister, will remain responsible for 
our strategic vision and for driving 
delivery across government. 
We will create an independent Industrial 
Strategy Council that will develop 
measures to assess and evaluate 
our Industrial Strategy and make 
recommendations to the government. 
The Council will have access to relevant 
government data and will be funded 
to commission specific evaluation 
projects as appropriate. It will be 
drawn from leading business men 
and women, investors, economists 
and academics from across the UK. 
The real test of a successful strategy 
is the consequences it has for the 
lives of our fellow citizens. That must 
mean more good jobs and better 
pay. We are committed to high 
quality jobs for all UK citizens: that 
is why we will be responding to and 
building on the recommendations 
of the Matthew Taylor Review to 
ensure that employment rights 
are protected and workers can 
benefit from new technology. 
By addressing these challenges we will 
be able to achieve the central objective 
of our Industrial Strategy – to improve 
living standards and economic growth 
across the country. This strategy is 
our long-term plan to ensure that 
people in all parts of the UK are able 
to lead fulfilling and prosperous lives, 
and that we can all make the most 
of the opportunities that lie ahead.
Industrial Strategy White Paper
30 
Grand 
Challenges
 31
The fourth 
industrial revolution 
is of a scale, speed 
and complexity that 
is unprecedented
Industrial Strategy White Paper
32 
Grand Challenges
We will set Grand Challenges to put the United Kingdom at the 
forefront of the industries of the future.
The world is undergoing a technological 
revolution. Artificial intelligence (AI) 
will transform the way we live and 
work, from the way we diagnose and 
treat cancer to the security of online 
transactions. This fourth industrial 
revolution is of a scale, speed and 
complexity that is unprecedented. The 
first industrial revolution mechanised 
production using water and steam 
power; the second created mass 
production using electric power; the 
third automated production using 
electronics and information technology. 
This fourth revolution is characterised 
by a fusion of technologies that is 
blurring the lines between the physical, 
digital and biological worlds15. It will 
disrupt nearly every sector in every 
country, creating new opportunities 
and challenges for people, places and 
businesses to which we must respond. 
This is not the only seismic global change 
to which the UK needs to respond. 
We owe it to ourselves and future 
generations to lower carbon emissions 
and move towards cleaner growth; we 
are facing a fundamental demographic 
shift as our population ages; and we are 
on the cusp of a profound shift in how 
we move people, goods and services 
around our towns, cities and countryside. 
We need to make the most of the global 
market opportunities these changes 
present. We must also embrace the 
technological advances that improve 
productivity across many sectors, as 
well as the quality of our everyday lives.
A truly strategic government must do 
more than just fix the foundations: it 
must also plan for a rapidly changing 
future, look to shape new markets and 
industries, and build the UK’s competitive 
advantage. The public and private 
sector must work with universities, 
researches and civil society to put the 
UK at the forefront of these revolutions, 
breaking down conventional barriers 
within and between business sectors 
and academic disciplines. This is what 
the Grand Challenges will achieve. 
History shows governments around 
the world have taken advantage of 
global challenges. In the 1970s, the 
UK government was instrumental in 
developing the North Sea oil and gas 
industry. More recently, thanks to 
tailored public support, the UK has built 
the largest off-shore wind capacity of 
any country16 and developed world 
class gene sequencing technologies. 
Overseas, Germany’s Industrie 4.017 is 
an example of a government helping 
prepare the country to take advantage 
of major trends, while in the United 
States the Defense Advanced Research 
Projects Agency (DARPA) and other 
 33
‘A truly strategic 
government must 
do more than just 
fix the foundations: 
it must also plan for 
a rapidly changing 
future.’
public research institutions 
have played a significant role 
in developing the technologies 
behind the internet and 
smartphone, spurring the 
growth of entire new markets. 
Other countries are already 
looking to capitalise upon the 
fourth industrial revolution. 
Japan, for example, has 
deliberate strategies to 
prepare for and to embrace 
these transformational 
changes in technology. 
The ability to meet our 
Grand Challenges rests 
on broad capabilities. The 
DARPA programme has been 
effective because it is part of 
a much wider research and 
development (R&D) effort. 
Our capacity to act nimbly 
and effectively depends 
on maintaining capacities 
across a wide range of 
technologies and disciplines. 
We can engage now with the 
challenge of AI because of 
previous investments in high 
performance computing. 
Similarly, we can rise to the 
challenge of an ageing society 
because we have already 
invested in resources such as 
the UK Biobank, which tracks 
the health information of 
500,000 volunteers18, and we 
have a lead in understanding 
the interaction between 
genes and environment. 
We must continue to 
support a broad range 
of key capabilities and 
emerging technologies. 
We also need to be clear 
where our distinctive 
advantages lie. We will build 
on our existing strengths, 
from cybersecurity, machine 
learning, microelectronics 
design and composite 
compound chip technology 
to biotechnologies and life 
sciences such as genetics 
and cell therapies. At the 
same time we must develop 
new strengths in emerging 
sectors. We must do this 
as a partnership between 
businesses, scientists, 
investors, educators and 
policy makers to take 
full advantage of the 
transformational potential 
of these trends to improve 
people’s lives, their work and 
the nation’s productivity. 
This partnership must be 
UK-wide, embracing our four 
nations. The UK government 
needs to work in collaboration 
with the governments and 
businesses of Scotland, Wales 
and Northern Ireland. Just as 
we committed in the Green 
Paper to holding ministerial 
forums with each devolved 
administration, we will work 
together to rise to each of 
the Grand Challenges. 
Industrial Strategy White Paper
34 
What are the Grand Challenges?
We have taken evidence from our Green 
Paper consultation, and worked with 
scientific leaders – the Government 
Office for Science, UK Research and 
Innovation (the Research Councils and 
Innovate UK), the Council for Science 
and Technology and the national 
academies – to identify four Grand 
Challenges. We will: 
`
`  put the UK at the forefront of the 
artificial intelligence and data 
revolution; 
`
`  maximise the advantages for UK 
industry from the global shift to  
clean growth;
`
`  become a world leader in shaping  
the future of mobility; and 
 ̀harness the power of innovation  
to help meet the needs of an  
ageing society. 
`
We must not expect that every 
individual action will bring guaranteed 
or immediate success. Through inviting 
competing proposals and ideas, the 
government will identify, support and 
fund a range of promising projects. 
We must not let a fear of failure make 
us unimaginative or risk averse. The 
government must be willing to back 
a broad portfolio of risky initiatives 
rather than be constrained by the 
possibility of individual failures. 
To respond to the Grand Challenges, 
business, academia, civil society and 
We will build on our strengths, including in cybersecurity machine learning, 
microelectronics design and composite compound chip technology
 35
‘Business, 
academia, civil 
society and the 
government must 
engage together, 
bringing their 
expertise and 
entrepreneurial 
spirit, to drive us all 
towards success.’ 
the government must work 
together, bringing their 
expertise and entrepreneurial 
spirit, to drive us all towards 
success. By setting out 
strategic visions and a 
positive role for government 
we hope to attract the 
engagement of some of 
the brightest minds from 
across the private and public 
sectors. For each Grand 
Challenge, we will ask leading 
figures from industry and 
academia to act as expert 
advisors, led by a ‘Business 
Champion’. Working 
alongside ministers, these 
figures will be responsible for 
engaging a diverse range of 
industry voices and raising 
the profile of the challenge. 
They will advise on how to 
make the most of the global 
opportunity it presents and 
review how we can work 
together to respond to it – 
such as improving supply 
and increasing demand 
in nascent markets, and 
ensuring that innovations 
can diffuse and scale. We 
will look to appoint Business 
Champions and external 
advisers in early 2018.
We will ensure that the 
government makes the 
most of all its policy levers 
to achieve success. Levers 
include regulations, funding 
and Sector Deals. 
We will also direct the 
government’s convening 
power, promote exports 
and inward investments, 
and build consumer trust 
in new technologies. Where 
appropriate, teams will 
develop ‘missions’ to tackle 
the Grand Challenges. They 
involve tackling specific 
problems, such as reducing 
carbon emissions by a given 
percentage over a specific 
year period19, using well 
defined and concrete goals 
to allow progress to be 
monitored and assessed, 
and the option to change 
course when appropriate. 
Progress on each Grand 
Challenge will be regularly 
reviewed to ensure that 
policies are having the 
desired impact, we are 
focusing on the correct 
issues, and we are 
aware of any changes 
in the UK’s advantage 
over other countries. 
In the next section we set 
out some early priorities 
for each of the four Grand 
Challenges. These will be 
developed in more detail 
with the Grand Challenge 
teams over the coming 
months including setting 
missions where appropriate.
Industrial Strategy White Paper
36 
Growing the AI & Data-Driven Economy
We will put the UK at the forefront of the AI and data revolution. 
Artificial intelligence and machine 
learning are general purpose 
technologies already starting to 
transform the global economy. They can 
be seen as new industries in their own 
right, but they are also transforming 
business models across many sectors 
as they deploy vast datasets to identify 
better ways of doing complex tasks – 
from helping doctors diagnose medical 
conditions more effectively to allowing 
people to communicate across the 
globe using instantaneous speech 
recognition and translation software. 
Embedding AI across the UK will create 
thousands of good quality jobs and 
drive economic growth. A recent study 
found digital technologies including AI 
created a net total of 80,000 new jobs 
annually across a population similar to 
the UK20. By one estimate, AI could add 
£232bn to the UK economy by 203021. 
We start from a position of strength. 
The UK is already a world leader 
in AI, with the building blocks to 
make significant advances. We 
have some of the best research 
institutions in the world and
SecondHands is a research project led by Ocado Technology that aims to design 
a collaborative robot that can offer help to maintenance technicians working in 
Ocado’s highly automated grocery warehouses
 37
globally-recognised 
capability in AI-related 
disciplines, including maths, 
computer science, ethics 
and linguistics. We have 
substantial datasets in 
public institutions where 
AI can be explored safely 
and securely. We have 
great strengths in the 
underpinning technologies, 
from ARM’s microchips 
to the microcomputers 
of Raspberry Pi. UK 
innovators push boundaries 
in robotics and the 
internet of things. These 
strengths are the result 
of academic excellence, 
research ingenuity, smart 
business decisions, and 
investment by previous 
governments of different 
political persuasions. 
As with previous 
revolutionary technologies, 
these changes cannot 
be resisted and it would 
be irresponsible to fail 
to prepare. Meeting our 
Grand Challenge means 
maximising the opportunities 
created by AI and advanced 
data technologies, and 
responding to the potential 
impacts on society. It 
is a call for businesses, 
research institutions and the 
government to work together 
throughout the UK to invest 
in these technologies, 
encourage their adoption 
and set standards in secure, 
trusted use of data. 
The AI and data-driven economy
Artificial intelligence: technologies with the ability 
to perform tasks that would otherwise require 
human intelligence, such as visual perception, speech 
recognition, and language translation 
Machine learning: a type of AI that allows computers to 
learn rapidly from large datasets without being explicitly 
programmed
Data-driven economy: a digitally connected economy 
that realises significant value from connected, large-
scale data that can be rapidly analysed by technology to 
generate insights and innovation 
‘Embedding AI 
across the UK will 
create thousands 
of good quality jobs 
and drive economic 
growth. AI could 
add £232bn to the 
economy by 2030.’
Industrial Strategy White Paper
38 
Cumulative average growth rate (CAGR), 2010-2016
Global venture capital investment in artifi cial intelligence
2010 
2011 
2012 
2013 
2014 
2015 
2016
£2.5
£2.0
£1.5
£1.0
£0.5
£0.0
57% CAGR
GBP billionsWe must ensure that Britain is among 
the first countries to ensure that 
everyone benefits from this revolution.
An early response to this challenge is 
the Artificial Intelligence Sector Deal, 
responding to the review by Professor 
Dame Wendy Hall and Jérôme Pesenti, 
Growing the AI Industry in the UK22. 
In consultation with a range of  
people with expertise in this area,  
we have identified four priorities for  
this Grand Challenge:
We will make the UK a global 
centre for artificial intelligence 
and data-driven innovation
We will build on our world-class 
research by working with industry 
to develop innovative uses of AI and 
advanced analytic technologies through 
the Industrial Strategy Challenge Fund*. 
For example, through the Industrial 
Strategy ‘Next generation of services’ 
project we will invest in developing 
applications of AI and data-driven 
innovation for service sectors; and, 
through the ‘Data to early diagnostics 
and precision medicine’ programme 
we will invest to enhance the power of 
health data to diagnose life-changing 
diseases at the earliest possible stage 
and develop precision treatments  
to cure them.
* All wave 2 programmes are subject to final 
business case, when further details on 
funding will be made available 
Source: Hall, W. and Pesenti, J. (2017) Growing the Artificial Intelligence Industry in the UK. 
Growth is cumulative average growth rate 2010 to 2016
 39
We will also support 
businesses with regulation 
that stimulates and facilitates 
innovation. Building on 
the ‘sandbox’ approaches 
that the Financial Conduct 
Authority and Ofgem, the 
energy regulator, have 
successfully implemented, 
we are establishing a 
£10m Regulators’ Pioneer 
Fund to support UK 
regulators to develop 
innovative approaches to 
emerging technologies.
We will foster, attract and 
retain the best and brightest 
research talent. The Alan 
Turing Institute will become 
the national research 
centre for AI, supporting 
new Turing Fellowships. 
We will invest £45m to 
support additional PhDs in 
AI and related disciplines, 
increasing numbers by at 
least 200 extra places a 
year by 2020-21, aiming to 
expand the numbers in UK 
universities year-on-year 
into the next decade.
We will also develop people’s 
skills to keep up with the 
speed of technological 
change by supporting 
universities and businesses 
to develop an industry-
funded masters programme, 
with an initial scale of over 
200 places. We will also work 
with industry to explore how 
best to train cross-discipline 
professionals to apply AI in 
their specialist areas, for 
example through conversion 
courses and continuing 
professional development.
We will support 
sectors to boost their 
productivity through 
artificial intelligence 
and data analytic 
technologies
A major source of 
productivity improvements 
comes from making the most 
of AI and machine learning 
across the economy. We 
are working with industry 
to establish an industry-led 
AI Council that can take 
a leadership role across 
sectors. The AI Council 
will be supported by a new 
government Office for AI. 
In partnership with industry 
and academia, these bodies 
will champion research and 
innovation, stimulate demand 
and accelerate uptake across 
all sectors of the economy. 
The office, working with the 
AI Council, will lead work to 
increase awareness of the 
advantages of advanced data 
analytic technologies and 
promote greater diversity 
in the AI workforce. 
‘We will build on 
our world-class 
research by working 
with industry to 
develop innovative 
uses of AI and 
advanced analytic 
technologies 
through the 
Industrial Strategy 
Challenge Fund.’
Industrial Strategy White Paper
40 
To support rapid adoption of AI 
technologies at scale, the Office for 
AI will work initially with six priority 
business sectors: cybersecurity; life 
sciences; construction; manufacturing; 
energy; and agricultural technology. 
The office will work in partnership 
with the new GovTech Catalyst to 
ensure the public sector can benefit 
from these technologies. It will also 
collaborate with partners to promote 
adoption, for example through the 
Digital Catapult’s ‘Machine Learning 
Garage’ programme launching in 
January. This programme will provide 
low-cost access to high quality machine 
learning computation power for start-
ups, and support businesses of all 
sizes with expertise on cost-effective 
machine learning computation. 
As the global market expands, we 
will increase our export support for 
AI and data businesses. The Global 
Entrepreneur Programme will look 
to increase its focus on attracting 
AI and data-led businesses to 
establish headquarters in the UK.
We will lead the world in safe and 
ethical use of data and artificial 
intelligence giving confidence and 
clarity to citizens and business
AI and data are already creating 
enormous opportunities for us to 
understand more about everything, 
from our health to what we like to 
buy. But it is vital that we remove 
barriers to innovation and ensure 
that data is used in a way that is 
both safe and fair to individuals. 
The UK will take an international 
leadership role by investing £9m 
in a new Centre for Data Ethics 
and Innovation. This world-first 
advisory body will review the existing 
governance landscape and advise the 
government on how we can enable and 
ensure ethical, safe and innovative uses 
of data, including AI. This will include 
engaging with industry to explore 
establishing data trusts to facilitate 
easy and secure sharing of data. We 
will consult widely in due course on 
the detailed remit for this new centre.
We will also strengthen overall data 
security, reinforcing the UK’s position 
as a global centre for cybersecurity. We 
will develop detailed recommendations 
over the next six months.
We will help people develop the 
skills needed for jobs of the future 
AI and data analytics will change jobs 
and businesses, and we want people 
to be able to capitalise on these 
opportunities. Our Industrial Strategy 
builds on our work to develop people’s 
skills, investing an additional £406m 
in maths, digital and technical skills 
in England. This includes investing 
£84m over the next five years to 
deliver a comprehensive programme 
to improve the teaching of computing 
and drive up participation in computer 
science. We will up-skill 8,000 
computer science teachers and work 
with industry to set up a new National 
Centre for Computing Education. 
 41
We will also promote a new 
adult digital skills entitlement 
to support basic training and 
our new National Retraining 
Scheme will help people 
re-skill and up-skill as the 
economy changes, including 
as a result of automation. 
This scheme will be informed 
by career learning pilots, 
which are testing barriers to 
adults engaging in learning, 
and the National Retraining 
Partnership. Initially it will 
focus on priority skills, 
including digital. As a first 
step, we will invest £30m 
to test the use of AI and 
innovative education 
technology (edtech) in 
online digital skills courses. 
We also need to build an 
evidence base about how 
technological change may 
affect different sectors, 
groups and places. Building 
on the work of Skills Advisory 
Panels and local Digital Skills 
Partnerships in England, the 
government and industry will 
explore how data analytics 
can be used to improve 
our understanding of 
employer demand for skills.
One of the many applications of AI and data analytics 
technologies is to enable more efficient use of energy 
and resources. For example, intelligent algorithms 
applied to data on atmospheric conditions and soil 
moisture could dramatically reduce the amount of water 
needed for agriculture. Actions to support our first 
Grand Challenge will complement the second challenge 
we have identified – maximising the advantages to UK 
industry of the global shift to clean growth.
‘AI and data are 
already creating 
enormous 
opportunities for us 
to understand more 
about everything, 
from our health to 
what we like to buy.’
Industrial Strategy White Paper
42 
Clean Growth
We will maximise the advantages for UK industry from the 
global shift to clean growth – through leading the world in the 
development, manufacture and use of low carbon technologies, 
systems and services that cost less than high carbon alternatives.
The move to cleaner economic growth 
– through low carbon technologies and 
the efficient use of resources – is one 
of the greatest industrial opportunities 
of our time. By one estimate, the UK’s 
clean economy could grow at four times 
the rate of GDP23. Whole new industries 
will be created and existing industries 
transformed as we move towards a 
low carbon, more resource-efficient 
economy. The Paris Agreement of 2015 
commits countries to revolutionising 
power, transport, heating and cooling, 
industrial processes and agriculture. 
The effect of these changes will be 
felt by businesses throughout 
the economy, and will involve the 
reallocation of trillions of pounds of 
public and private finance towards 
the pursuit of cleaner growth. 
Stowe Global Coal Index and global green bonds issuance
Shift of global investment towards the clean economy
2011 
2012 
2013 
2014 
2015 
2016 
2017
160
120
80
40
0
8000
6000
4000
2000
0
Billion USDGlobal green bond issuance
Stowe Global Coal Index 
Source: Climate Bonds Initiative (2017); Stowe Global Indexes. *2017 green bond issuance is estimated. 
The Coal Index takes the last data of each month from Jan 11 to Oct 17
 43
The UK has been at the 
forefront of encouraging the 
world to move towards clean 
growth. We are determined 
to play a leading role in 
providing the technologies, 
innovations, goods and 
services of this future. We 
want to support our strong 
automotive, aerospace and 
construction industries 
to increase their share of 
global markets as they shift 
to clean energy sources 
and efficient new materials. 
We want UK businesses to 
lead the development of 
new markets in areas such 
as smart energy systems 
and the ‘bio-economy’ 
– the use of renewable 
biological resources from 
land and sea to produce 
food, materials and energy. 
We also want everyone to 
feel the benefits of clean 
growth, so we will work to 
create a future where our 
cities benefit from cleaner 
air, our businesses from 
enhanced resource security 
and our countryside from 
regenerated natural capital. 
The UK is already one of the 
most successful countries 
at growing our economy 
while reducing emissions. We 
have cut emissions by more 
than 40 per cent24 since 
1990, while our economy 
has grown by two thirds25. 
Our recently-published 
Clean Growth Strategy26 
sets out our ambitious 
proposals for continuing 
this progress through the 
2020s. We have world-
leading capabilities in areas 
including electric vehicle 
manufacture, offshore wind, 
smart energy systems, 
sustainable construction, 
precision agriculture and 
green finance. With business, 
academia, the government 
and civil society working 
together, we can do more. 
We will aim to maximise UK 
businesses’ share of the 
global markets as they are 
transformed by the shift 
to clean growth, and make 
our country one of the best 
places in the world to develop 
and sell clean technologies. 
We will increase our support 
for innovation so that the 
costs of clean technologies, 
systems and services are 
reduced across all sectors, 
and we will collaborate 
on international initiatives 
such as Mission Innovation 
– a global partnership for 
clean energy research and 
development – to bring 
‘The move to 
cleaner economic 
growth – through 
low carbon 
technologies 
and the efficient 
use of resources 
– is one of the 
greatest industrial 
opportunities of  
our time.’
Industrial Strategy White Paper
44 
The UK has been at the forefront of the global move 
towards clean growth, with projects such as the 
Blyth wind farm in the north east of England
 45
‘Our long-term 
goals are to make 
clean technologies 
cost less than 
high carbon 
alternatives, and 
for UK businesses 
to take the lead in 
supplying them to 
global markets.’
the best minds together 
to accelerate progress. 
We will align our policies, 
regulations, taxes and 
investments to grow the 
markets for these new 
innovations so that they are 
successfully commercialised 
in the UK. Our long-term 
goals are to make clean 
technologies cost less than 
high carbon alternatives, 
and for UK businesses to 
take the lead in supplying 
them to global markets.
We will take action to 
establish and extend UK 
leadership in the following 
early priority areas:
We will develop smart 
systems for cheap 
and clean energy 
across power, heating 
and transport 
Smart systems transform 
our ability to use clean 
energy cost-effectively, and 
so will be in high demand 
globally. We are good at 
designing such systems. A 
national electricity grid was 
a great British technical 
achievement. Now we 
are setting ourselves the 
challenge of remodelling it so 
it can handle many different 
sources of clean energy, 
and use new technologies 
to store energy and manage 
demand. We will launch 
a new Industrial Strategy 
‘Prospering from the energy 
revolution’ programme 
to develop world-leading 
local smart energy systems 
that deliver cheaper and 
cleaner energy across power, 
heating and transport, 
while creating high value 
jobs and export capabilities. 
Our world-leading Smart 
Systems and Flexibility Plan27 
will build on the rollout of 
smart meters to grow the 
markets for these systems 
and technologies in the UK. 
We will continue to work 
closely with the nuclear and 
offshore wind industries 
to further drive down the 
costs of clean power, while 
building UK supply chains. 
We will also continue to 
explore the long-term 
options for clean heating 
and the many potential uses 
of low carbon hydrogen.
We will transform 
construction techniques 
to dramatically 
improve efficiency 
A rapidly urbanising world 
needs buildings that can be 
constructed and operated 
more efficiently. Our 
new Industrial Strategy 
‘Transforming Construction’ 
programme will take full 
Industrial Strategy White Paper
46 
advantage of new technologies to 
provide safer, healthier and more 
affordable places to live and work that 
use dramatically less energy to build 
and run. It will ensure UK businesses 
develop world-leading capabilities in 
integrating construction, digital energy 
and efficiency technologies – the 
kind of system integration at which 
the UK excels. We have launched 
a call for evidence on additional 
measures to build a market for energy 
efficiency among homeowners. 
This will incentivise greater private 
investment in household and 
commercial building energy efficiency, 
to grow the markets for these types 
of buildings and technologies. 
We will make our energy-
intensive industries competitive 
in the clean economy 
Global markets for clean and efficient 
industrial fuels, processes and materials 
are growing rapidly. We are investing 
£162m in innovation for low carbon 
industry, and developing a new strategy 
for the bio-economy. We will work with 
industry to stimulate further market 
investment in clean and efficient 
technologies and process, including 
through all manufacturing Sector 
Deals, and through developing a 
new scheme to support investment 
in industrial energy efficiency. 
This scheme will help large businesses 
install measures that will cut their 
energy use and bills, as well as improve 
their productivity. This will build on the 
2050 Decarbonisation Action Plans 
that we have agreed with seven of 
the most energy-intensive sectors.
We will grow the markets for innovative farming 
technologies and techniques such as the use of drones
 47
We will put the UK at 
the forefront of the 
global move to high-
efficiency agriculture 
Rising global demand for 
food and water is increasing 
the need for agriculture 
that produces more from 
less. Our new ‘Transforming 
food production: from farm 
to fork’ programme will 
put the UK at the forefront 
of advanced sustainable 
agriculture. Over the 
coming years,as we replace 
the Common Agricultural 
Policy, we will increase the 
incentives for investment 
in sustainable agriculture, 
helping to grow the markets 
for innovative technologies  
and techniques. With 
powers set to return from 
the EU, the UK government 
is in discussions with the 
devolved administrations 
over future arrangements. 
Our work will develop in 
line with the outcome 
of those discussions. 
We will make the UK 
the global standard-
setter for finance that 
supports clean growth 
We will extend the UK’s 
global leadership in green 
finance – building on our 
world-leading financial sector 
– working with industry 
through our new Green 
Finance Taskforce. 
We are now working with 
the British Standards 
Institution and the City of 
London’s Green Finance 
Initiative to develop the 
world’s first green financial 
management standards. 
We use an enormous amount of energy to move people 
and goods from place to place: around 40 per cent 
of the UK’s total final energy use28. Developing UK 
leadership in low carbon transport is therefore a shared 
priority with our Future of Mobility Grand Challenge.  
We will invest in innovation to develop clean technologies 
across road, rail, aviation and maritime transport. 
‘We are investing 
£162m in innovation 
for low-carbon 
industry, and also 
developing a new 
strategy for the  
bio-economy.’
Industrial Strategy White Paper
48 
The Future of Mobility
We will become a world leader in shaping the future of mobility.
We are on the cusp of a profound 
change in how we move people, goods 
and services around our towns, cities 
and countryside. This is driven by 
extraordinary innovation in engineering, 
technology and business models. 
Significant investments are being made 
in the electrification and automation of 
road vehicles, in the modernisation of 
rail services to deliver higher capacity, 
speed and connectivity, and in the 
development of autonomous aerial and 
marine transport. New market entrants 
and new business models, such as 
ride-hailing services, ride sharing and 
‘mobility as a service’, are challenging 
our assumptions about how we travel. 
These technologies can transform 
public transport. The UK’s road 
and rail network could dramatically 
reduce carbon emissions and other 
pollutants, congestion could be 
reduced through higher-density use 
of road space enabled by automated 
vehicles, and mobility could be 
available when we want it, where 
we want it and how we want it. 
New electric car registrations
UK electric car ownership has increased rapidly since 2010
40
30
20
10
0
1.5%
1.0%
0.5%
0.0%
2010 
2011 
2012 
2013 
2014 
2015 
2016
ThousandsNew registrations (LHS)
% of total new cars (RHS)
Source: Department for Transport (2017) Vehicles statistics. *Electric car includes plug-in hybrids, 
100% electric, range extended electric and fuel cell electric cars
 49
‘New market 
entrants and new 
business models, 
such as ride-hailing 
services, ride 
sharing and mobility 
as a service, are 
challenging our 
assumptions about 
how we travel.’
We have significant strengths 
in many of the most relevant 
areas of research and 
development, including 
artificial intelligence and 
complex vehicle engineering. 
We have dynamic businesses 
developing new mobility 
solutions, and innovative, 
strong and diverse 
automotive, rail, maritime 
and aviation sectors. We 
have a long history of 
bringing transport innovation 
to the world. We also have 
strengthening leadership 
at a local level, with mayors 
in English cities and City 
Deal Boards in Scotland and 
Wales actively pursuing new 
ways to address the complex 
transport needs of our cities. 
As the UK has the highest 
percentage of the population 
living in urban areas in the 
OECD we are well placed 
to contribute to these 
challenges of urbanisation29. 
We will build on the 
innovative work of the 
Office for Low Emission 
Vehicles, the Centre for 
Connected and Autonomous 
Vehicles and the Transport 
Catapult to look across the 
road transport system for 
opportunities to improve 
customers’ experience, drive 
efficiency and enable people 
to move around more freely. 
We will work with a full range 
of stakeholders across the 
UK to deliver this challenge.
The government wants to see fully self-driving cars  
on the UK roads by 2021
Industrial Strategy White Paper
50 
We have identified four early priorities: 
We will establish a flexible 
regulatory framework to 
encourage new modes of transport 
and new business models
Mobility has always depended on 
standards. Our regulatory environment 
must evolve with the times to support 
the emergence of new technologies and 
new business models. We will ensure 
we continue to have one of the most 
open environments in the world for 
transport innovation and new services 
by undertaking a thorough regulatory 
review of all relevant legislation. 
The government wants to see fully 
self-driving cars, without a human 
operator, on UK roads by 2021. We will 
therefore make world-leading changes 
to the regulatory framework, including 
updating our code of practice for 
testing automated vehicles to allow 
developers to apply to test their vehicles 
nationwide without a human safety 
operator and carrying out a project 
with the Law Commission to set out 
proposals for a long-term regulatory 
framework for self-driving vehicles.
We will seize the opportunities 
and address the challenges of 
moving from hydrocarbon to  
zero emission vehicles
For zero emission vehicles to become 
universal the right framework is needed. 
Building on the work of the Faraday 
Battery Institute and the Office for Low 
Emission Vehicles programme, we have 
announced a package to support the 
transition to zero emission vehicles. 
This includes a new £400m Charging 
Infrastructure Investment Fund 
(£200m from the government to 
be matched by private investors); 
£100m new funding for the plug-
in car grant; £40m R&D funding 
(matched by industry) for new charging 
technologies including on-street and 
wireless projects; and a commitment 
that the government will lead the 
way, making 25 per cent of all cars in 
the central government department 
fleet ultra-low emission by 2022. 
Building on these commitments, in 
the coming months we will publish a 
strategy on government support for 
the transition to zero emission road 
transport, ensuring the UK continues to 
be a world leader in the development, 
manufacture and use of these vehicles. 
 51
‘We will ensure we 
continue to have 
one of the most 
open environments 
in the world 
for transport 
innovation and 
new services by 
undertaking a 
thorough regulatory 
review.’
We will prepare for a 
future of new mobility 
services, increased 
autonomy, journey-
sharing and a blurring 
of the distinctions 
between private and 
public transport
The future mobility 
marketplace is likely to 
operate differently to 
the transport system of 
today. We will consult with 
industry and others on the 
government’s role to support 
this, and publish a Future 
of Urban Mobility strategy 
within the next 12 months. 
The National Infrastructure 
Commission (NIC) will also 
launch a new innovation 
prize to determine how 
future roadbuilding should 
adapt to supporting self-
driving cars, with the West 
Midlands, a UK centre of 
expertise on connected 
and autonomous vehicles, 
being a key testing location 
for the best entries. We will 
also be investing £5m from 
the 5G Testbeds and Trials 
programme for an initial 
trial, starting in 2018, of 5G 
applications and deployment 
on roads, including helping 
to test how we can maximise 
future productivity benefits 
from self-driving cars.
We will explore ways to 
use data to accelerate 
development of new 
mobility services 
and enable the more 
effective operation of 
our transport system
We will continue to invest 
in R&D and testbed 
infrastructure for 
connected and autonomous 
vehicles. We will explore 
how simulated digital 
environments can support 
and accelerate development 
of self-driving technology 
through an R&D competition 
to be launched by the 
Centre for Connected and 
Autonomous Vehicles, 
the first R&D competition 
of its kind in Europe. 
One of the main groups benefiting from this revolution  
is older people who may no longer be able to drive or 
have other difficulties with mobility. Our fourth challenge 
is focused on meeting the particular needs of an  
ageing society.
Industrial Strategy White Paper
52 
Ageing Society
We will harness the power of innovation to help meet the needs of 
an ageing society. 
The UK population is ageing, as it is 
across the industrialised world. We 
are living longer than ever before; we 
have historically lower birth rates; a 
large cohort of people – the so-called 
‘baby boomers’ born after the Second 
World War – are reaching retirement30. 
One in three children born in the UK 
today can expect to live to 10031.
The prospect of longer lives will 
require people to plan their careers 
and retirement differently. Ageing 
populations will create new demands 
for technologies, products and services, 
including new care technologies, 
new housing models and innovative 
savings products for retirement. We 
have an obligation to help our older 
citizens lead independent, fulfilled lives, 
continuing to contribute to society.
UK population and proportion of population aged 65 and over
By 2046 almost 1 in 4 people will be 65 years old and over 
MillionsUK population (RHS)
Aged 65 or over (%, LHS)
1976 1986 1996 2006 2016 2026 2036 2046
40%
30%
20%
10%
0%
80
60
40
20
14.2%
24.8%
Source: ONS (2017) “Population estimates”  
*2016-based population projections are used
 53
Innovation in age-related 
products and services can 
make a significant difference 
to UK productivity and 
individuals’ wellbeing, and 
will find a growing global 
market. Ageing also presents 
significant challenges to the 
economy, including greater 
caring demands on those of 
working age and increased 
health and social care costs. 
Without action, an ageing 
population could reduce the 
size of our workforce and 
lead to lower productivity.
If we succeed, we will create 
an economy which works for 
everyone, regardless of age. 
A new generation of British 
businesses will be thriving in 
the growing global market 
for age-related products 
and services. Older people 
will be able to lead fuller, 
more independent lives, 
increasingly supported by 
smart home technologies, 
wearable devices and tech-
enabled health and care 
services. British businesses 
will have redesigned jobs 
and workplaces to better 
use their older workers’ 
experience, enabling 
individuals to keep active 
and stay in work. Workers 
will have more flexibility 
to help balance their work 
with caring responsibilities. 
Younger generations will be 
able to plan for their longer 
careers with confidence. 
‘One in three 
children born in 
the UK today can 
expect to live to 
100. The prospect 
of longer lives will 
require people to 
plan their careers 
and retirement 
differently.’
Ageing populations will create new demands for 
technologies, products and services
Industrial Strategy White Paper
54 
Many countries are grappling with this 
challenge, most notably Japan. There 
are some distinctive British opportunities 
which build on our strengths. These 
include powerful health datasets in the 
NHS, world-leading design institutes, 
the artificial intelligence research 
community, a strong life sciences 
sector and the financial services 
industry. Making the most of these 
advantages could turn the ageing 
challenge into a global opportunity.
We will take action to and extend UK 
leadership in four early priority areas:
We will support new products 
and services for the growing 
global population of older people, 
meeting important social needs 
and realising the business 
opportunity for the UK
Globally, there are likely to be two 
billion people over the age of 60 by 
205032. UK businesses must take 
advantage of markets created by this 
rise in older consumers. Doing this 
could also improve people’s quality of 
life. Through a forthcoming Industrial 
Strategy ‘Healthy Ageing’ programme 
we will invest in innovation to help 
older people maintain their chosen 
lifestyle, and stay independent for 
longer. We will explore opportunities 
to work with UK businesses to 
encourage emerging consumer 
markets, and the development of 
innovative products and services 
that support people throughout their 
working life and into retirement. This 
could include new finance products or 
partnering with the retail tech sector 
to identify barriers to the development 
and diffusion of new products.
We will support sectors to adapt to 
a changing and ageing workforce
As people lead longer, healthier lives, 
they will need to save and work for 
longer to ensure they have a secure 
retirement. With an ageing workforce 
and fewer people entering the labour 
market from education and training, 
employers will need a more flexible 
labour market that can accommodate 
older workers. The government will 
continue to build on the Fuller Working 
Lives Strategy and has already 
appointed a Business Champion 
specifically for older workers. This 
signals our commitment to work with 
employers to promote the benefits 
of older workers to employers across 
England – in terms of their strategic 
approach and practical advice. We 
will also encourage industries to 
lead in adapting their workplaces 
to the requirements of an ageing 
workforce. To help realise the potential 
in the labour market, including 
amongst women, older workers, 
carers and disabled people, we will 
work with business to make flexible 
working a reality for all employees 
across Britain and to inform the 
evaluation of the Right to Request 
Flexible Working regulations.
We will leverage our health data 
to improve health outcomes and 
UK leadership in life sciences
The NHS generates powerful datasets 
that could be harnessed in a safe, 
fair and secure manner to develop 
 55
‘There are some 
distinctive British 
opportunities 
which build on our 
strengths… Making 
the most of these 
advantages could 
turn the ageing 
challenge into a 
global opportunity.‘
new tools to diagnose 
and treat illness earlier. In 
response to Professor Sir 
John Bell’s life sciences 
review33, the government 
will be working to develop a 
number of regional Digital 
Innovation Hubs. These 
hubs will support the use of 
data for research purposes 
within the strict parameters 
set by the National Data 
Guardian. Health and social 
care are devolved but the 
technological challenges and 
benefits can be supported 
and seized across the UK. 
Through the Industrial 
Strategy ‘Data to early 
diagnostics and precision 
medicine’ programme, 
we will invest to continue 
to explore the application 
of data for better, more 
innovative health and care.
We will support care 
providers to adapt 
their business models 
to changing demands, 
encouraging new models of 
care to develop and flourish 
The government’s forthcoming 
Green Paper on care and 
support in England will respond 
to the wide challenges facing 
the social care sector, setting 
out proposals for long-term, 
sustainable reform. The 
Industrial Strategy can play 
a role in supporting the 
care sector to adapt for the 
future. We will support the 
care sector to innovate and 
develop new business models, 
including by making better 
use of emerging technology 
through the Industrial Strategy 
Challenge Fund. We will also 
encourage care businesses 
to access the opportunities 
provided by the strengthened 
Growth Hub network.
Next Steps 
What we have outlined here 
is just the start. Over the 
months ahead we want to 
work in partnership with 
businesses, universities, 
researchers and civil society 
on these Grand Challenges. 
All four are ambitious – and 
they are difficult. Success is 
not guaranteed. But trying 
to tackle them is not just 
worthwhile, it is essential. If we 
can rise to these challenges 
we will have equipped 
our country for a future 
that is not just prosperous 
but also socially and 
environmentally responsible. 
Industrial Strategy White Paper
56
Ideas
 57
Our ability to 
innovate – to develop 
new ideas and 
deploy them - is one 
of Britain’s historic 
strengths
Industrial Strategy White Paper
58
Ideas
To be the world’s most innovative economy
Our ability to innovate – to develop 
new ideas and deploy them – is one of 
Britain’s great historic strengths, from 
the jet engine and the bagless vacuum to 
MRI scanners and the World Wide Web.
We are a global leader in science and 
research: top in measures of research 
excellence and home to four of the top 
10 universities in the world. 
We need to do more to ensure our 
excellence in discovery translates 
into its application in industrial and 
commercial practices, and so into 
increased productivity. The government 
and the private sector need to invest 
more in research and development 
(R&D). We need to be better at turning 
exciting ideas into strong commercial 
products and services. And we must 
do more to grow innovation strengths 
in every part of the UK, as well as 
maintaining our position as a global 
leader in science and innovation. 
Through our Industrial Strategy, Britain 
will take a leading role in a new industrial 
revolution as significant as the last. We 
will drive change through the biggest 
increase in public investment in R&D in 
our history. We will ensure the UK is the 
best place for innovators, and through 
our Grand Challenges we will drive 
partnerships between the best minds in 
science and business throughout Britain. 
Key policies include:
`
`  Raising total R&D investment to 
2.4 per cent of GDP by 2027
`
`  Increasing the rate of R&D tax 
credit to 12 per cent
`
`  Investing £725m in new Industrial 
Strategy Challenge Fund 
programmes to capture the value 
of innovation
 
 59
Innovation is about new ideas, 
new ways of doing things, 
new products and services, 
new technologies and new 
business models. It can come 
from radical transformation 
or incremental improvements; 
from within a business or 
from a new insurgent; from 
a major scientific advance or 
the application of a known 
technology in a new process. 
Our ideas are crucial to the 
productivity improvements 
that boost our earning power.
Our ability to innovate – to 
develop new ideas and deploy 
them – is one of Britain’s 
historic strengths. We are a 
nation of innovators: from Sir 
Frank Whittle’s jet engine to 
Sir Tim Berners-Lee’s World 
Wide Web; from Sir James 
Dyson’s bagless vacuum 
cleaner to the automatic 
kettle of Russell Hobbs. The 
UK is rated one of the most 
innovative countries in the 
world – an ‘innovation leader’ 
in the 2017 European 
 UK fi eld-weighted citation impact across 
research fi elds
The UK research base across research fi elds
Humanities
Business
Social 
sciences
Engineering
Physical sciences
Clinical sciences
Mathematics
Environmental 
sciences
Biological
sciences
Health & medical 
sciences
2.0
1.5
1.0
0.5
0.0
2006
2010
2014
World Average (=1.0)
‘We will drive 
change through the 
biggest increase in 
public investment 
in research and 
development in our 
history.’ 
Source: Elsevier (2017) “International comparative performance of the UK 
Research Base 2016”. A field-weighted citation impact of 1.0 represents  
world average
Industrial Strategy White Paper
60
Innovation Scoreboard and 23 per cent 
above the EU average performance34. 
We are recognised as a global leader in 
science and research, top in measures 
of research excellence35 and home 
to four of the top ten universities in 
the world36. We punch above our 
weight in delivering high-quality, 
impactful and diverse research work.
We have leading-edge research and 
development (R&D) in many sectors 
and industries, including but not 
limited to life sciences, aerospace, 
automotive, technology, energy and 
the creative industries. We also have 
world-class service sectors including 
in law, accounting, financial services, 
advertising, architecture and insurance. 
We have a lively and thriving start-up 
environment. We produce and attract 
some of the most talented people in 
the world and draw in proportionally 
more internationally mobile R&D 
than other large countries37. 
While we score well on measures of 
research and innovation, we need 
to do more to ensure this translates 
into improvements in earning power. 
According to the UK Innovation Survey, 
just over half of our businesses are 
classed as innovative38, meaning there 
is significant potential to raise our game. 
There are four key challenges that 
this Industrial Strategy will address. 
Over half of UK firms are innovating.  
Of those firms:
51% used new business practices.
38% used 
new methods 
of organising 
their work.
36% 
introduced 
new products.
30% changed their 
marketing concepts 
or strategies.
25% 
innovated in 
their processes.
Based on UK Innovation Survey Data 2015. Survey only includes enterprises with 10+ employees
 61
Our first challenge is that 
neither the government nor 
the private sector is investing 
enough in R&D. This holds 
back the productivity of 
both public services and 
business. It means the UK 
risks losing out in the race to 
develop the technologies and 
innovations that will shape 
the businesses and markets 
of the future. We invest less 
in R&D than most of our 
competitors – 1.7 per cent of 
GDP compared to 2.8 per 
cent in the United States and 
2.9 per cent in Germany39. 
Even after allowing for the 
structure of our economy 
– which is dominated by 
services rather than the 
traditionally R&D-intensive 
sectors like manufacturing – 
we still invest comparatively 
little40. Business investment 
in R&D in the UK is relatively 
low41. R&D performed in 
businesses is concentrated 
in a small number of big 
businesses and in a small 
number of sectors such as 
pharmaceuticals, motor 
vehicles and technology42. 
Indeed, just over three 
quarters of private R&D 
investment in the UK is driven 
by 400 businesses43. Fewer of 
our small and medium-sized 
enterprises (SMEs) introduce 
new products and processes 
than their European 
competitors44. Furthermore, 
the latest data shows that 
the UK’s strength in research 
is being challenged by 
emerging economies45. 
R&D is an example of public 
spending stimulating rather 
than displacing private 
spending: economies 
with high levels of public 
investment in R&D also 
typically have high levels 
of private investment46. 
In the UK every £1 of 
public investment on R&D 
attracts around £1.40 of 
private investment47.
Our second challenge is 
improving our ability to turn 
exciting ideas into commercial 
products and services and 
capture their maximum value. 
Our world-class science and 
research does not always 
feed through to world-leading 
home-grown businesses. 
There have been major 
breakthroughs made in UK 
universities and research 
labs bought up by global 
businesses – from magnetic 
resonance imaging in the 
1970s, lithium-ion batteries 
in the 1980s, monoclonal 
antibodies in the 1990s and 
genetic sequencing in the 
last decade. All of these 
are pioneering UK ideas 
being developed elsewhere 
or bought by businesses 
from overseas. Within R&D, 
the ‘D’ for development 
needs a particular boost.
‘R&D is an example 
of public spending 
stimulating rather 
than displacing 
private spending… 
In the UK every £1 of 
public investment on 
R&D attracts around 
£1.40 in private 
investment.’
Industrial Strategy White Paper
62
Much of our innovation tends to be in 
areas such as software and branding, 
including marketing and advertising48, 
which often require less patient capital 
to fund them. We are good at low-cost 
innovation and flexible start-ups but the 
long and patient process of getting a new 
technology to market is difficult. As a 
result many of our innovative businesses 
are nimble, flexible and imaginative 
but do not grow to be substantial, big 
or strong. There are exceptions, but in 
general British businesses’ R&D tends 
to favour quick routes to market, rather 
than long development times, and 
selling businesses to growing them.
Our third challenge is to build research 
and innovation excellence across the UK. 
There is world class R&D and innovation 
across the UK, from excellent research 
in university departments and public 
research organisations to investments 
from leading businesses. We need to 
capitalise on these strengths and foster 
the local ecosystems that can support 
innovation and sustained growth. 
The Science and Innovation Audits49 – led 
by consortia of business, universities 
and Local Enterprise Partnerships 
in England and relevant agencies in 
the devolved nations – are revealing 
distinct local and regional strengths and 
opportunities for collaboration across 
the UK. But they are also exposing the 
barriers an area can face in building 
its strengths into an ecosystem that 
attracts investment and talent – such 
as access to skills or knowledge and the 
capacity of businesses to innovate.
 Gross domestic expenditure on R&D by source of fi nancing as a 
proportion of GDP, 2015 
UK’s spending on research and development compared to other countries
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
KDRISRCHESWEJPNAUTDNKDEUFINUSABELOECDFRASVNISLNLDCZENORCANGBRIRLESTHUNITALUXPRTNZLESPSVKPOLGRCTURLVAMEXCHLNon-government fi nanced
Government fi nanced
Source: OECD (2017) “OECD Economic Surveys: United Kingdom 2017”. *2014 data for France, Ireland, Italy, 
Portugal and OECD aggregate. 2013 data for Belgium, Israel, Luxembourg and Sweden. Non-government 
financed includes finance from higher education, which may be partly government-financed; and from the 
rest of the world, which may include foreign and supranational government finance
 63
Our fourth challenge is to 
ensure the UK remains a 
world leader in global science 
and innovation collaboration. 
A total of 17 per cent of UK 
R&D investment is financed 
from abroad50 and half 
of UK R&D performed in 
business was by overseas-
owned businesses51.
Half of all UK research 
publications in 2014 were 
internationally co-authored 
– a share that has increased 
every year since 2010 – 
with these articles tending 
to score more highly on 
excellence and impact52. 
This demonstrates that 
international collaboration is 
vital to our continued success. 
But UK leadership is being 
challenged by emerging 
economies and competition 
grows for research talent 
and private investment. 
For us to remain a leading 
R&D nation, we will need 
to capitalise on our strong 
reputation and continue to 
attract the top talent from 
around the world, including 
from EU member states. 
We must ensure we remain 
connected to other leading 
international sources of ideas 
and have the capacity to 
absorb the advances they are 
making, working closely with 
the devolved nations to make 
the most of strengths and 
opportunities across the UK. 
We need to make strategic 
choices to maximise our 
international collaborations 
to support UK priorities and 
the Grand Challenges. 
If we address all this together 
we will be stronger not just 
in R&D and wider innovation, 
but in maximising the 
productivity and earning 
power benefits for businesses 
and people throughout the 
country. By 2030 we want the 
UK to be the most innovative 
country in the world: a 
home to the most dynamic 
businesses at the cutting 
edge of new technologies 
and processes, and which 
supports all businesses to 
adopt new ways of working 
to help them prosper. This 
means investing in R&D 
and the skills needed in a 
changing work environment 
to maximise the rewards 
and benefits innovation can 
bring to everyone in the UK. 
‘By 2030 we want the 
UK to be the most 
innovative country 
in the world: a home 
to the most dynamic 
businesses at the 
cutting edge of new 
technologies and 
processes.’
of total UK  
R&D 
investment
17% 
is financed from abroad
Industrial Strategy White Paper
64
A nation of innovators
1668 
Sir Isaac Newton 
invented the reflecting 
telescope
1825 
George Stephenson invents 
the passenger railway
1843 
Ada Lovelace 
created one of the 
first computer 
programmes
1880 
Joseph Swan started 
manufacturing and selling 
light bulbs
1926 
John Logie Baird was the first 
to transmit moving pictures
1967 
Sir Godfrey Hounsfield conceives 
the idea for the CT Scanner
1978 
First successful birth of a 
child after IVF treatment 
2004 
Discovery and isolation of a single 
free-standing atomic layer of carbon 
(graphene) at Manchester University
  65
2011 
Saturn Bioponics develop the world’s first 
three-dimensional crop growing system
2012 
Susannah Clarke revolutionised joint replacements  
by using 3D printed technology allowing personalised 
joint replacement with fewer complications
2013 
Surrey Satellite Technology’s S-band radar 
system, NovaSAR, which revolutionises 
navigation and surveillance communications 
wins an Innovation award from the Institution of 
Engineering and Technology (IET) 
2015 
Oxford Nanopore launch MinION a portable 
DNA sequencing USB device for on-the-go 
RNA/DNA sequencing which can be used to 
monitor viruses like Ebola or trace antibiotic 
resistance without the need for large scale 
computing infrastructure 
2015 
DeepMind’s AlphaGo defeats the 
reigning Go European Champion 
becoming the first programme to 
defeat a professional player, giving 
us deeper understanding of the power 
and flexibility of machine learning 
2016 
Double Negative wins its third 
Academy Award for its pioneering 
visual effects work on sci-fi 
psychological thriller Ex Machina
2017 
Richard Henderson awarded the Nobel 
Chemistry Prize for developing cryo-
electron microscopy for the high-
resolution structure determination of 
biomolecules in solution 
Industrial Strategy White Paper
66
Our approach
Investing in R&D to transform our economy.
For the UK to become the most 
innovative country in the world we 
need a generational increase in public 
and private R&D investment. In this 
strategy we commit to reach 2.4 
per cent of GDP investment in R&D 
by 2027 and to reach 3 per cent of 
GDP in the longer term, placing us in 
the top quartile of OECD countries.
If we meet this target we will 
transform our economy. It could 
increase public and private R&D 
investment by as much as £80bn over 
the next 10 years, with much wider 
benefits across the UK economy. 
We could see a dramatic change 
in the use of R&D by industry, 
with our businesses creating the 
next generation of technologies to 
revolutionise productivity in all sectors 
from construction and agriculture 
to manufacturing and the creative 
industries. This will raise the standard 
of living and establish UK leadership 
in global markets. The UK will lead 
the way in the R&D driving our Grand 
Challenges: in artificial intelligence and 
data-driven technology, clean growth, 
the ageing society and mobility.
Our Grand Challenges will be driven by R&D in artificial intelligence and data-driven 
technology, clean growth, adapting to an ageing society and future mobility
 67
‘Our vision for 
a knowledge-
led economy is 
underpinned by 
world-leading 
research, world-
class facilities 
and international 
collaborations that 
push scientific 
frontiers and attract 
the brightest talents.’
Our vision for a knowledge-
led economy is underpinned 
by world-leading research, 
world-class facilities and 
international collaborations 
that push scientific frontiers 
and attract the brightest 
talents, from Nobel Prize 
winners to ambitious 
graduate students. 
‘Innovation clusters’ will 
form and grow around our 
universities and research 
organisations, bringing 
together world-class 
research, business expertise 
and entrepreneurial drive. 
These clusters can create 
thousands of skilled jobs 
in R&D, innovation and 
wider sectors, driven by 
the growth in science, 
technology, engineering 
and maths (STEM) skills led 
by new teachers and more 
doctorates. These skilled 
people and businesses 
must be located throughout 
the UK, growing research 
and innovation strengths 
throughout England, as 
well as in Scotland, Wales 
and Northern Ireland.
Increasing investment in 
R&D to 2.4 per cent of GDP 
in a decade is ambitious 
and will require concerted 
effort by the government 
and business. As a first step 
we will invest an additional 
£2.3bn over what was 
previously planned in 
2021/22, raising total 
public investment in R&D 
to approximately £12.5bn 
in that year alone. This 
investment will see public 
R&D spending increase as 
a share of GDP every year. 
It means that we will have 
raised public investment in 
R&D from around £9.5bn 
last year (2016/17) to around 
£12.5bn in 2021/22. 
This is an extra £7bn over 
five years – the biggest ever 
increase in public funding 
of R&D. We will invest 
strategically in technologies 
and ideas closer to market 
to drive UK competitiveness, 
while also continuing to fund 
the curiosity-driven research 
that is fundamental to the 
quality of our work and 
ensures our place as a world-
leading knowledge economy. 
We will work with industry 
in the coming months to 
develop a roadmap for 
meeting this target. This 
will provide a framework to 
drive business investment 
in R&D and focus on key 
sectors, technologies 
£12.5bn
public investment in 
R&D in 2021/22 alone