What Does the UK Government’s Industrial Strategy Mean for SMEs?

The UK government recently unveiled its 10-year Industrial Strategy, which aims to boost investment, create jobs and drive long-term economic growth, building on its wider “Plan for Change”. But policy announcements and reality are often two different things so what are the practical implications of this strategy and how will it impact SMEs?

The government claims this new strategy has been developed in partnership with businesses and trade unions in order to unlock national investment and support over 1.1m new jobs over the next ten years. Reaction so far has been largely positive, with the announcements welcomed by business groups such as the CBI, Enterprise Nation and Make UK. Prime Minister Keir Starmer stated that the strategy delivers the long-term certainty and direction British businesses need to “invest, innovate and create good jobs that put more money in people’s pockets” whilst the Chancellor Rachel Reeves added that it will “slash barriers to investment” and ensure industries “thrive”.

All positive stuff so far, however there has been disappointment voiced from the retail, leisure and hospitality sectors where it is felt the strategy doesn’t go far enough to support Britain’s struggling high streets. The strategy spells out specific sector plans for the manufacturing, creative and clean energy industries as well as for businesses in the digital and technologies and professional services sectors, so it is perhaps understandable why there has been backlash from those businesses seemingly forgotten by the policy paper.

In this post we’ll explore the announced plans and how they impact UK small businesses, both positively and less positively.

The Big Positives

• Access to Finance: The British Business Bank’s (BBB) total financial capacity will increase to £25.6 billion, enabling a two-thirds increase in support for smaller businesses. This includes an additional £4 billion for the Industrial Strategy’s eight priority sectors (the IS-8, encompassing the five sectors detailed above which have their own specific sector plans along with financial services, defence and life sciences), aiming to leverage £12 billion in private capital. The BBB will also introduce a new “Cluster Champions programme” in 10 city regions and expand its Nations and Regions Investment Funds (NRIF) by £450 million to provide additional regional funding.
• Business Support: A new “Business Growth Service” is being introduced in summer 2025 as a single online platform for businesses to find support for starting up, scaling up, exporting, investing and accessing recruitment assistance. The government will also explore extending the GOV.UK One Login to businesses and improving the GOV.UK AI chatbot which will be welcome news to anyone who has struggled to get answers from HMRC when filing tax returns.
• Tackling Late Payments: In a move that mirrors the demands of local Sussex business owners when we surveyed them last year, the government plans “significant reforms” to address late payments, including upcoming legislation requiring large companies to report their payment performance in annual reports and a new consultation on further legislative measures. Emma Jones CBE has been appointed as the new Small Business Commissioner to help tackle this issue.
• Adopting Digital Technologies: The Made Smarter technology adoption programme will expand to support a further 5,500 small and medium-sized manufacturing businesses, and a similar scheme will be created for the professional and business services sector.
• Skills and Talent: Measures include new Growth and Skills Levy short courses in areas like digital, AI and engineering, continued rollout of shorter apprenticeships and funding uplifts for priority courses for 16-19-year-olds. A £187 million national digital skills programme, including £18 million for small businesses, is also part of the plan. The first-ever Clean Energy Workforce Strategy will also be published in 2025.
• Research and Development (R&D): The government will provide £22.6 billion per year for R&D by 2029-30 and establish a Local Innovation Partnerships Fund of up to £500 million to support high-potential innovation clusters across the UK.
• International Trade: Plans include increasing the maximum size of UK Export Finance’s financial portfolio, improved digital export support and pilots to accelerate Electronic Trade Documents (ETDs) adoption. Trade commissioners and ambassadors in major markets will focus on supporting the IS-8 sectors.
• Reduced Regulatory Burdens: The strategy aims to reduce the administrative costs of regulation for businesses by 25% by the end of the Parliament and reduce the overall number of regulators.
• Public Procurement: The Procurement Act (2023) which came into force earlier this year makes it simpler for new entrants and smaller firms to bid for public contracts. Further reforms are proposed, including setting targets for direct spend with SMEs and excluding suppliers who don’t pay contractors on time from major contracts

The Unanswered Questions

• Energy Costs: One of the big policy headlines, but while the strategy promises to cut electricity bills by up to 25% from 2027 for over 7,000 electricity-intensive businesses in manufacturing sectors (e.g., automotive, aerospace and chemicals) and increase the British Industry Supercharger discount from 60% to 90% for around 500 energy-intensive firms, this does not directly benefit all small businesses, particularly those outside these specific manufacturing sectors. UKHospitality, for instance, expressed disappointment that retail and leisure sectors were excluded despite high energy bills and rising staffing costs and it will make little difference to most office based SMEs. The question of who bears the cost of these levy reductions hasn’t really been addressed either so we aren’t ready to give this the seal of approval.
• Implementation Risk: Previous industrial strategies have been criticised for having gone “longer on words than they did action”. The Resolution Foundation notes that this strategy “will really stand out if it lasts” but we’ve seen big promises like this before fade away. As ever, delivery is key.
• Broader Economic Challenges: The government loves to hammer home the point that it inherited the twin challenges of “crumbling public services and crippled public finances”and while the strategy aims for economic growth, these underlying issues still present significant hurdles. There is a great deal of reliance on outside investment coming in to fuel high growth sectors, none of which is guaranteed.
• Focus on “Gazelle” Companies: The Resolution Foundation have suggested the strategy should focus on rapidly growing “gazelle” companies to drive a more dynamic economy, but this risks ignoring the needs of SMEs that aren’t on quite such an ambitious growth path. Not every business can turbocharge its output and ramp up productivity to deliver against the ambitious growth targets the government wants to see. Many will simply want to see their costs come down and conditions for trading ease.
• Potential Tax Impacts: While the strategy commits to capping corporation tax at 25% and retaining investment tax breaks, there has already been much speculation that higher employer national insurance contributions could hit growth and that potential tax-raising budgets may loom ominously on the horizon.

In Summary

Ultimately, the measures announced are bold, ambitious and comprehensive, focused on enabling growth through investment, targeted skills development, streamlined regulations, enhanced digital adoption and strengthened international trade opportunities. While some sectors may feel aggrieved at having been overlooked (at least for now), the general reaction from the wider business community has been very positive, if tinged with a hint of scepticism over it all coming to fruition as proposed.

It’s certainly the case that long-term certainty and support are badly needed for the UK economy to thrive in a landscape that’s evolving at a phenomenal pace. For many sectors it is still very much up in the air as to just how the advances in machine learning, AI and automation will impact performance, productivity and profits and though some of these areas are addressed in the policy framework, we may yet find the strategy does not go far enough to keep up with the rapid developments in these areas.

If your business is looking forward to taking advantage of some of the proposals in the governments 10-year industrial strategy and is ready for growth, why not speak to us about our latest availability for serviced offices in Brighton and Shoreham? JetSpace is a great environment in which to build and better your business so come and take a look at our current suites for rent on flexible terms.