Last month the government published its industrial strategy Green Paper. Invest 2035: The UK’s Modern Industrial Strategy sets out the early thinking from within government on how “sustainable, inclusive, and resilient growth” can be achieved over the next ten years. The final industrial strategy will be published in Spring 2025, and right now the government will be sifting through the many responses to the consultation that closed just last week.

The full version of CPP’s response can be found here.

To summarise, we believe that Invest 2035 represents a serious and honest understanding of the UK’s comparative strengths and weaknesses, as well as the factors that limit private sector investment in particular. Yet we think there are two areas where the final industrial strategy should go much further: a more expansive vision for regional growth; and a broader definition and focus for foundational sectors.

Invest 2035’s basic hypothesis is that the government’s national economic priorities – higher investment, creating good jobs, balancing regional disparities, decarbonising the economy, and enhancing the UK’s global competitiveness – are best achieved by leaning into our comparative strengths in eight frontier sectors.1 These priorities are not dissimilar to those of previous industrial strategies; what makes Invest 2035 most similar to those of our recent past is that, like them, it emphasises sectoral growth as the driving force to achieve the government’s economic priorities.

The final industrial strategy should treat both place-based and sectoral economic performance as equally important, mutually-reinforcing objectives. Local Growth Plans (LGPs) appear to be the key new lever to drive regional growth. We think, to be successful, LGPs should adhere to three principles:

• Good LGPs should be treated as a locally-owned commitment to driving growth, rather than a regional variant of national priorities

• LGPs will have to tackle place-wide barriers to growth, in addition to developing sector and clusters, if they are to endure as local documents

• LGPs should be designed with specific projects in mind, and with thought as to how a project pipeline can form the basis of a deeper partnership between places and government

Given most existing Combined Authorities (CAs) - which will be leading on LGPs - cover city-regions, there is some sense to this. But to secure the government’s mission for “growth everywhere”, a far more expansive economic offer to areas outside of city-regions will be needed. Previous work by CPP identified 95 clusters of emerging economic activity in high-value sub-sectors taking place in low productivity, low earning areas – many of which are based outside of city-regions and in former industrial, rural, and coastal areas.

The industrial strategy green paper defines foundational sectors as “the sectors which provide critical inputs and infrastructure to our growth-driving sectors”, and gives two specific examples: energy and defence. These sectors are strategically important – they are major employers in their own right, components of supply chains, and critically important contributors to local labour markets for frontier firms.

CPP proposes expanding a focus on “foundational sectors” to a broader emphasis on the “foundational economy” – those sectors which are non-tradable (i.e. those which must be consumed locally) such as retail, hospitality, or care.

These foundational economy sectors account for a significant share of total employment (around 40% of employment nationally): improving the economic performance of foundational sectors is critical to raising the living standards of the millions of workers employed in them. They also directly impact frontier sector growth: the education sector supports human capital development, the early years and adult social care sectors support higher levels of economic activity; while high quality local services are important to attracting and retaining mobile, high skilled workers.

For these reasons, the development of foundational sectors should be a central objective of the government’s industrial strategy, demanding close alignment between the industrial strategy and the Plan to Make Work Pay (especially with its commitment to sectoral bargaining). Local and regional governments particularly have a role to play in supporting foundational sectors to embrace principles of good work – for example, through promoting values-based procurement in local supply chains, and supporting take up of the real Living Wage and flexible working.