Industries and the UK economy

The UK’s economy is dominated by services industries.

In 2021, manufacturing industries contributed £204 billion to the UK economy, around 10% of total economic output in terms of gross value added. Services industries contributed £1.7 trillion, 80% of total economic output.

The following chart shows the relative economic growth of services and manufacturing industries since 1990, when consistent data began.

Jobs by industry at national level are broadly in line with economic output as described above. In April-June 2022, there were 2.6 million jobs in manufacturing, 7% of all UK jobs. There were 30.2 million jobs in services industries, 84% of all jobs.

Current prospects and forecasts for manufacturing and services industries are available in the Library’s Key Economic Indicators.

What is the UK Government’s industrial strategy?

An ‘industrial strategy’ is an approach to coordinating a wide range of economic policies to achieve particular objectives, which need not be purely economic.

In 2017, Theresa May’s Government published an Industrial Strategy. The Strategy encompassed a range of cross-sector polices under the themes: Ideas, People, Infrastructure, Business and Places. It also established a series of partnerships between industry and government in key industrial sectors (the ‘sector deals’) including the automotive, aerospace and life sciences industries among others.

In March 2021, Boris Johnson as Prime Minister and Rishi Sunak as Chancellor published their Plan for Growth, which replaced the 2017 Industrial Strategy. The Plan set out the Government’s strategy to support economic growth and “build back better” following the coronavirus pandemic. The Plan set out three priority areas for growth: levelling up, reaching net zero greenhouse gas emissions and Global Britain, and centred around “three pillars of investment”: infrastructure, skills and innovation. Many of the industrial policies included in the Plan for Growth are captured in other strategy documents such as, the Levelling Up White Paper (February 2022) the Innovation Strategy (July 2021), the Net Zero Strategy (October 2021) and 10-point plan for a green industrial revolution (November 2020).

In September 2022, then new Prime Minister Liz Truss and then Chancellor Kwasi Kwarteng published a new Growth Plan, which alongside tax cuts and its energy support package, set out plans for growing private sector investment, infrastructure development and a skilled labour market. Many of these policies have since been reversed as Jeremy Hunt replaced Kwasi Kwarteng as Chancellor on 14 October and Rishi Sunak became Prime Minister. The forthcoming Autumn Statement will set out the current Government’s policies in these areas. The Library briefing, Background to the Autumn Statement 2022 provides further discussion.  

The Labour Party has set out its priorities for an industrial strategy should it come into government, including a “£28bn-a-year investment plan for a green economy”.

Challenges facing manufacturing industries

Rising energy prices are a pressing and immediate concern for manufacturing industries, many of which are high consumers of energy. According to an Office for National Statistics business survey, more than half of manufacturing businesses (56%) said their business had been affected by energy prices in early October, the second highest of any broad industry group after hospitality.

Make UK, trade body for UK manufacturers, reported in early September that rising energy costs were “causing major disruption for half of companies” and that nearly 60% of their members surveyed said that energy costs were now “business threatening”.

Long term challenges for manufacturing sectors include decarbonisation (which often requires increased electricity consumption) and ensuring a sufficient supply of skilled workers.

Further reading

Industries and industrial strategy

Library data resource, Industries in the UK (21 June 2022)

Library briefing, 2017 Industrial Strategy (8 August 2019)

BEIS Committee, Post-pandemic economic growth: Industrial policy in the UK (PDF), HC 385, 28 June 2021 and Government response (PDF) (24 September 2021).

Boston Consulting Group, A Pathway to Growth: How to Seize Opportunities for Innovation & Development, 1 September 2022

Resolution foundation Enduring Strengths, 28 April 2022

Productivity Institute, What next for the UK industrial strategy?, 22 April 2021

Institute for Government, How to design a successful industrial strategy 17 December 2020

Steel industry

UK Steel industry: statistics and policy (18 June 2021)

Parliamentary Office of Science and Technology, Green Steel POSTnote (23 May 2022)

BEIS Committee, Liberty Steel and the Future of the UK Steel Industry (PDF), HC 821, 5 November 2021 and Government response (PDF) (20 January 2022).

Parliamentary questions: PQ 18985, 1 June 2022 [Iron and Steel: Manufacturing Industries] and PQ 77371, 7 November 2022 [Iron and Steel]

UK steel industry warns it needs state aid to survive green transition, Sylvia Pfeifer, Financial Times, 6 November 2022 [subscription only]

Rees-Mogg in talks with UK steelmakers as fears grow for thousands of jobs, Joe Middleton, The Guardian, 17 October 2022

UKSteel, Future of UK Steel – Five Steel Sector Priorities for a New Government, September 2022

Automotive industry

Parliamentary Question: PQ 17956, 21 June 2022 [Motor Vehicles: Manufacturing Industries]

Society of Motor Manufacturers and Traders (SMMT), Industry Facts 2022

SMMT, Full Throttle to Full Charge: Driving forward UK automotive,

UK battery firm Britishvolt near collapse as it seeks funding, Dearbail Jordan, BBC News, 31 October 2021

Brexit buffets Britain’s stalling car industry, Jon Yeomans, The Sunday Times, 30 October 2022 [subscription only]

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