Government backs AI and fintech in eight-sector growth drive

The government has this week begun unveiling its growth plans for eight key sectors in the UK. The plans form part of the wider modern Industrial Strategy, a ten-year plan to promote business investment and technological innovation.

The chosen eight, which Whitehall says have the greatest growth potential over the next decade, include Artificial Intelligence (AI), digital and technology, and financial services. 

On Monday, the Department for Business and Trade announced that £4bn will be invested by the British Business Bank (BBB) to specifically support startups and scale-ups across the eight growth-driving sectors.

What are the eight sectors in the new Industrial Strategy?

The modern Industrial Strategy sets out a number of key measures to support UK business by increasing funding, reducing red tape, and keeping energy bill costs down.

The government has identified eight focus sectors (termed the IS-8) that it believes will play a pivotal role in the UK’s economic growth by 2035.  These are:

• Advanced manufacturing
• Creative industries
• Clean energy industries
• Digital and technologies
• Professional and business services
• Life sciences
• Financial services
• Defence

Each field now has, or is expecting, a bespoke Sector Plan which outlines how the government will enhance skills and drive innovation in each area. All eight have been developed alongside industry experts.

Yesterday, £150m was announced for five AI and technology programmes which will be rolled out across the UK Professional and Business Services (PBS) industry. 

PBS sectors such as legal, management consulting, and accountancy make up a significant part of the UK economy. Service firms are under pressure to invest in emerging tech like AI to stay competitive in the European market, particularly in the fast-growth area of lawtech.

Secretary of State for Business and Trade, Jonathan Reynolds described PBS as “a jewel in the crown of the economy, worth over £300bn a year and making up one in every seven jobs.” He added the new funding would ensure the UK will be an “AI maker, not an AI taker”.

Regional leaders welcome plans

In its 160-page plan, Whitehall described the Industrial Strategy as “unashamedly place-based, recognising that stronger regional growth is critical for the competitiveness of the IS-8”. Leaders across various regions in the UK have applauded the announcement.

Key localised initiatives include specialist PBS hubs in the North, Midlands, and Scotland to boost digital transformation beyond London. Wales will receive £30m for a Local Innovation Partnerships Fund, while £2.6bn of the BBB’s £4bn capital injection will target local firm growth via the Nations and Regions Investment Funds.

Each Sector Plan will also place emphasis on regionally significant industries, such as advanced manufacturing in the West Midlands and clean energy in the Highlands. 

Aline Miller, Academic Innovation Lead at Manchester’s newest innovation district, Sister, describes the news as “encouraging”. She adds that the government’s decision to place “greater emphasis on regional strengths outside the Golden Triangle [..] marks a needed shift towards a more balanced, inclusive model of national growth.”

What is missing from the industrial strategy?

Long-term thinking must be welcomed by regional and industry leaders. Encouraging and facilitating the adoption of innovative tech will help to support growth for scale-ups, while the creation of expertise clusters should boost entrepreneurship in years to come.

Some firms, though, risk falling through the cracks of the proposed plans. Most are in traditional sectors like social care, construction, and hospitality, but are also in desperate need of innovation to combat issues like rising overheads and widening labour shortages.

While Whitehall has alluded to broader business support measures, such as lowering wholesale energy bills, it has stayed mum on exactly what these policies will look like. 

Eventually, a shift to Net Zero could drop prices. But small businesses are going bust today. With costs rising, the government must remember that alongside a ten-year vision, struggling firms will need near-term support packages to help them reach 2035.