Re:View 27 June 2025
Stat of the week
“Industrial electricity prices in the UK are significantly higher than those in most competing economies, particularly throughout Europe and North America. Energy-intensive firms paid twice the European average in electricity costs last year.”
The UK's Modern Industrial Strategy, 23 June 2025
It’s been a gruelling week in politics. On the international stage, US participation in attacks on Iran over the weekend has led to a week of speculation about escalation and UK involvement. At home, the Government have faced a very different kind of escalation over their welfare reform bill, culminating in their climb-down last night with concessions. The prospect of tax rises in the autumn looks likelier than ever.
In all this chaos it’s easy to lose sight of the long term. The Government’s Modern Industrial Strategy, published this week, could provide the plan, but didn’t catch quite so many headlines.
There’s plenty in there to like. Commitments to reduce core costs which hold back growth – punitive planning processes, high energy prices (which also drive high core commodity prices in areas like steel), and giving businesses confidence of policy stability so they can plan for longer-term investments. All these measures are positive for supporting broad-base industrial growth, particularly in the kind of energy, planning and investment-intensive industries which politicians are always keen to champion, and particularly in areas outside of London where high-end manufacturing could become more viable.
But will the measures in here achieve those goals? It's hard to say. Few areas seem to be a radical departure from those tried by the previous Government. Beyond continuing the previous Government’s investment in SMRs and Sizewell C, there’s not much new on nuclear, the best hope for low-cost low-carbon energy. The offshore wind investments championed in the strategy (which are also generating the bulk of the new clean energy jobs it promises) are never going to be reliable enough as a source for most of the grid's demand. Fast-track routes for infrastructure development are also good, but not new, and rely on the Government cracking down further on powers to bring judicial reviews.
Some of the sector-focused reforms in the Strategy are ones to be suspicious of. The history of government industrial strategies based on 'picking winners' has been fraught with failures of central planning. And pouring more public money into capital spending risks crowding out private capital – the “gap for venture capital investment into defence” in Britain is clearly mostly driven by the MoD’s unwillingness to be a customer, so we continue plugging capital into companies which just lack opportunities to make real revenue from another part of the government.
Meanwhile other areas of government policy seem to be pulling in the opposite direction. Employment rights legislation which could well deter global businesses from investing here is still on the agenda. Tax rises on businesses have contributed to more companies closing than starting up, and the number of PAYE employees falling.
This isn’t a debate about the future alone. While the Government has worked on this Strategy, businesses in the industries which it claims are vital continue to close or withdraw investment from the UK. Publishing strategies is the easy part, driving them through is always far harder.
Read of the week
Chris Giles’ column today comments on research by the IFS and Resolution Foundation this week looking at the drivers of regional inequality. He makes the rare argument that, everything else being equal, these internal migration patterns have a point to them – lots of people want to move to London, and we should let them. Economic agglomeration effects are powerful and have driven some of the biggest increases in living standards in history. It's true that plenty of people wish they could get better jobs nearer to where they grew up, and government policy is always aimed at meeting that demand. But particularly for the highest earners, we need to be realistic about the flow of talent to our capital, which competes with other global capital cities for the best and the brightest.
(Re:)Meet the team!
Each week, we will be reintroducing our readers to a member of our small but mighty Re:State team. Ahead of our flagship "Re:Imagining Health Conference" next week, the spotlight is on…
Rosie Beacon, Research Manager and Head of Health - @BeaconRosie, @rosiebeacon.bsky.social
Tell us something about yourself that we might not know?
There's a rumour in my family that we are descendants of Lord Nelson...
What are you working on?
Hospital reform! Currently putting together a paper on patient flow.
Who is your favourite reformer?
Anne Boleyn. A woman famous for being beheaded but pioneered some of the first redistributive tax policies in the British state!
What gets you out of bed in the morning?
The idea of coming into work and joyfully chatting with my esteemed colleagues obviously!