In its recently published UK Modern Industrial Strategy, the UK Government focuses on eight high-potential sectors - collectively known as the 'IS-8' - that are best positioned to drive economic growth, job creation and higher wages. These sectors are Digital and Technologies, Advanced Manufacturing, Creative Industries, Clean Energy Industries, Professional and Business Services, Life Sciences, Financial Services, and Defence, which together account for 32% of UK GDP1.
As part of the strategy, the government has released detailed sector plans for five of these areas, including Digital and Technologies.
The Digital and Technologies Sector Plan ("the plan") outlines a long-term framework aimed at strengthening the UK's role in the global tech economy. It sets out a range of proposed measures spanning investment, infrastructure, skills and regulation that could help address some of the persistent challenges and barriers to growth faced by tech businesses.
This article summarises how the plan aims to support the UK's technology sector and what it could mean for businesses operating in this space. As digital transformation increasingly underpins every part of the economy, technology also plays a fundamental role in enabling progress across other industries and will be a key theme in the plans for other IS-8 sectors, particularly Defence, Advanced Manufacturing, Life Sciences, and Financial Services.
A vision for growth and security
The plan sets out a vision for the UK to become one of the top three global destinations for building and scaling technology businesses by 2035. It includes a target to secure the UK's first trillion-dollar tech company and to lead in commercial research and development (R&D) investment outside the US and China. This is supported by a commitment to increase public R&D investment to £22.6 billion annually by 2029/30, with the aim of leveraging private capital to amplify its impact.
The strategy also highlights the dual-use nature of many emerging technologies - such as Artificial Intelligence (AI) and quantum computing - and their relevance to national security. This intersection of economic and security priorities is a recurring theme throughout the plan.
Six pillars of support for the tech ecosystem
The plan is structured around six interrelated areas of focus:
1. Boosting R&D investment
The government intends to provide long-term R&D funding, including 10-year budgets for institutions like the National Quantum Computing Centre. It aims to attract £3 of private R&D investment for every £1 of public funding by 2035. Agencies such as UKRI, ARIA, and Innovate UK are expected to play key roles in delivering this ambition.
2. Increasing access to finance
Access to capital remains a challenge for many UK tech firms, particularly in deep tech. The British Business Bank will expand its investment capacity to £25.6 billion, with £4 billion allocated for growth capital in priority sectors. Additional support will come from the National Wealth Fund and the National Security Strategic Investment Fund.
Reforms to pension schemes and public markets are also planned to encourage institutional investment, while the Office for Investment will work to attract global capital.
3. Creating a skilled workforce
To address ongoing skills shortages, the plan includes initiatives such as the £187 million TechFirst programme, which aims to support up to one million young people through the funding of over 4,500 bursaries and placements. The government also plans to expand AI fellowships, short courses, and visa routes to attract international talent.
4. Enhancing infrastructure
The plan acknowledges infrastructure as a key enabler of tech growth. It includes £1 billion to expand AI compute capacity and £1.8 billion for gigabit broadband rollout. Planning reforms and grid connection improvements are also proposed to support data centres and semiconductor facilities.
5. Delivering pro-innovation regulation
A new Regulatory Innovation Office will work to reduce regulatory barriers and accelerate approvals. Initiatives such as the AI Airlock and Engineering Biology Sandbox Fund are intended to support experimentation and innovation. A Digital Standards Strategy and improved data-sharing infrastructure are also part of the regulatory agenda.
6. Securing international partnerships
The UK aims to strengthen its global position through trade agreements and science diplomacy. Partnerships with countries such as the US, EU, Japan, and Australia are expected to support joint development in areas like AI, semiconductors, and quantum technologies. The UK's re-entry into Horizon Europe and participation in the AUKUS trilateral agreement are also highlighted.
A focus on frontier technologies
The plan identifies six frontier technologies with high growth potential and strategic importance:
- Artificial Intelligence: Over £2 billion is committed to AI infrastructure, including supercomputers and AI Growth Zones. The government aims to upskill 7.5 million workers in AI by 2030.
- Advanced Connectivity Technologies (ACT): £240 million in R&D funding and £130 million for lab infrastructure are allocated to support development in areas such as 6G and satellite networks.
- Cyber security: The plan includes £10 million for academic spinouts, £6 million for start-up support, and £24 million for secure chip design. A new National Cyber Innovation Centre is also planned.
- Engineering biology: With £380 million in new funding, the UK aims to scale its engineering biology capabilities and reform regulation to support innovation in areas like precision-bred crops.
- Quantum technologies: The UK ranks second globally in quantum investment. The plan includes £670 million for quantum computing and a 10-year commitment to the National Quantum Computing Centre.
- Semiconductors: Investments include a new UK Semiconductor Centre, £60 million for Pragmatic Semiconductor, and a £35 million skills programme to support talent development.
Regional growth and clusters
The plan places strong emphasis on regional innovation, identifying key clusters in Cambridge, Manchester, Bristol, South Wales, and Belfast. The £500 million Local Innovation Partnerships Fund is designed to empower local leaders to drive R&D investment. AI Growth Zones and Cluster Champions will also support high-potential firms across the UK.
A new model of public-private partnership
The strategy emphasises collaboration with industry, academia, and local leaders. Advisory panels for each frontier technology will guide implementation, and the Industrial Strategy Council will monitor progress using metrics such as business investment, GVA, and job creation.
What does this mean for UK tech businesses?
For UK tech businesses, the plan outlines a clearer framework for growth. It proposes a range of measures that could help address long-standing challenges, including:
- Improved access to public and private capital, including targeted support for dual-use technologies.
- Expanded R&D funding and infrastructure, particularly in frontier technologies.
- A more responsive skills pipeline, with new training initiatives and visa routes.
- Evolving regulatory and procurement processes aimed at reducing friction for market entry.
- Support for regional tech ecosystems and international collaboration opportunities.
While the plan presents positive commitments for future growth and innovation, its impact will ultimately depend on how effectively these commitments are implemented and how well they align with the evolving needs of the sector. We're looking forward to supporting businesses as the strategy unfolds and seeing the positive impacts it will bring throughout the UK and for our trading partners.
Footnote
1 See page 115 of the Industrial Strategy Paper
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