UK climate policy deep dive: Industrial strategy
“When considering government pathways, such as the modern industrial strategy, and what they mean for how we approach climate and transition in our business strategies, it is important to recognise that it is not ultimately possible to predict how we will reach the net zero Paris goal. What role will electrification play versus carbon capture and storage versus nature-based solutions, for example? In addition, some countries have goals going beyond 2050 – we cannot think in isolation. For this reason, as a board, we can use these policy signals to help us not only think about possible future pathways but also to focus on shorter term volatility and on how to manage this and the increasing associated climate risks.”
- Non-executive director, Financial Services
The UK government published the UK’s Modern Industrial Strategy in June 2025, as part of its mission to kickstart growth. The Strategy recognises net zero as the economic opportunity of the century and emphasises the role of growth sectors in progressing the UK economy towards net zero. This follows a manifesto commitment and consultation on the Green Paper ‘Invest 2035: the UK’s modern industrial strategy’.
The Modern Industrial Strategy brings together an overview of the government’s plans and policies to help increase private investment in the UK’s future growth. This includes ongoing or upcoming policy interventions to help tackle high industrial electricity costs, promote free and fair trade, strengthen economic security, expand access to finance, drive innovation, capitalise on the value of UK data, enhance skills and access to talent, reduce regulatory burdens and planning barriers. Further targeted strategies and consultations on proposed policy measures are expected in the coming months.
Eight sectors, and specific sub-sectors, are identified as having high-potential for growth through specific sector plans: advanced manufacturing, clean energy technologies, creative industries, defence, digital and technologies, financial services, life sciences, professional and business services (remaining sector plans expected in the coming months). The importance of taking a whole-value chain approach was recognised, with emphasis on the importance of foundational industries, including electricity networks, ports, construction, steel, critical minerals, composites, materials and chemicals.
The objectives for the industrial strategy set out by government are: to drive growth, net zero, regional growth, economic security, and resilience. More specifically, the net zero objectives for the industrial strategy will be to: (1) capture the growth opportunities of the clean energy and net zero transition, (2) identify and support high potential clean energy industrial sectors, (3) commit to sustainable growth aligned with net zero and environmental objectives.
The Industrial Strategy Advisory Council, which includes business leaders, is supporting the government with independent advice and recommendations. The National Wealth Fund, launched by the government in October 2024 with £27.8 billion capitalisation, has been given a strategic steer by the Chancellor, which includes an emphasis on sectors in the industrial strategy.
Key takeaways for boards
- Contributing to net zero should not be seen as secondary, but as a way to tackle short-term volatility as well as being a driver for resilient and sustainable growth. Reducing greenhouse gas emissions and restoring nature are global challenges; with this scale of transformation comes huge opportunity. In 2023-24, the UK’s net zero economy grew by 10.1% and jobs in the sector generated 38% more economic value than the UK average, highlighting the sector’s immense potential.
- Failing to account for sustainability in a modern industrial strategy would be short-sighted. Businesses are already taking action, but they need the right policy landscape to accelerate progress. The industrial strategy must futureproof growth, avoiding potential risks, such as creating stranded assets, costly retrofits and challenges for the low-carbon energy system. It must also acknowledge that there is no single predictable pathway to net zero, and that the route to a resilient, low-carbon economy will need to encompass a number of tactics and technologies, potentially ranging from large-scale electrification to nature-based solutions and carbon capture and storage. It is also vital that while the UK sets out its own strategy, and is well-placed to lead on the green economy, it does not do so in isolation – the current economic and environmental challenges are global, and require global solutions and global collaboration.
- The UK government is uniquely placed to create a coherent and genuinely joined-up policy package to put the UK economy on the right footing for resilient, environmentally sustainable and low-carbon growth. With a number of strategies and policies in development, the government is an opportune position to offer businesses an enabling environment.
- This includes:
- Strategic direction with the Missions, Carbon Budget Delivery & Growth Plan (expected in October), and other sector strategies.
- Access to clean energy and infrastructure, clarifying what will be available where and when with the Infrastructure Strategy, Clean Power Action Plan, special energy plans (SSEP, CSNP, RESP), and other relevant policies.
- Clarity on the role of businesses to support nature, with the revised Environmental Improvement Plan (due in 2025).
- Support for circularity, with the upcoming Circular Economy Strategy for England (Green Paper due in 2025).
- Demand drivers for low-carbon products and services, including through public procurement.
Board discussion areas
- To what extent do our current strategic ambitions align with the Modern Industrial Strategy? Are we clear what a largely zero carbon economy in 2050 means for our markets, our clients, our products and our operations? Where do we want to be in 5-10 years’ time and how does our current transition pathway align to this?
- What do the Modern Industrial Strategy and UK government plans for growth and transition to a low-carbon economy mean for the risks (physical, financial, transition, systemic) our business, and our clients’ businesses, are exposed to?
- What are the most significant growth opportunities in the low-carbon economy? Is our business currently positioned to take advantage of these opportunities, and how can we optimise the business to do so?
- To what extent is our business’ growth future-proofed for sustainability?
- What is needed to enable sustainable growth? (e.g. access to clean energy)
- How is sustainability incorporated into business growth?
- What are the risks where sustainability is not embedded? (e.g. stranded assets, future retrofit)
- What are the barriers to embedding sustainability? (e.g. lack of infrastructure, unproven technology, uncertainty, cost)
- What further policy measures (e.g. subsidies, incentives) are required from the government to deliver low-carbon growth? Have we fully mapped these policy dependencies in our business strategy and transition plans?
- What are our competitors doing/offering? What does best in class look like in our sector, in the UK&I and worldwide? Is there opportunity for collaboration or strategic partnerships, either directly or through sector and member groups and professional institutions?
- What are we doing to engage with our customers, suppliers and investee companies on our transition plans and business strategy? What are our clients, customers, shareholders, investors, and employees asking us about and expecting of us on carbon and climate? Is our response sufficient?
- How will our business, our investee companies, clients, stakeholders, supply chain, and customers be impacted by the government’s plans, e.g. more market demand, less market demand, innovation, emergence of new non-sector players, etc.?
- Is our board equipped to tackle these issues – do we have the right governance structures and competencies in place? Do we have a plan for building board competency where needed?
Further reading from Chapter Zero and the Aldersgate Group
- Maximising the impact of the National Wealth Fund, published in July 2025.
- Futureproofing growth through the Modern Industrial Strategy, published in May 2025.
- Placing decarbonisation at the heart of industrial strategy, published in July 2024.
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