Britain Cannot Outsource Its Industrial Future
Manufacturing is just 8% of the British economy. Rebuilding industrial capability is both an economic opportunity and a matter of national resilience.
In brief
- Manufacturing accounts for just 8% of Britain’s economy compared to 18% in Germany and 10% in France.
- Germany, Taiwan, South Korea all show how long-term industrial investment builds economic strength, skilled jobs and national resilience.
- Britain must rebuild its industrial base and diversify into advanced manufacturing, and develop stronger domestic supply chains.
In April 2025, Parliament was recalled on a Saturday to prevent the closure of Britain's last blast furnaces. It should never have taken emergency legislation to remind us that steelmaking matters. A country that cannot reliably produce the materials and equipment its economy and armed forces depend on has surrendered more than jobs. It has surrendered a measure of its independence.
I am not suggesting we reopen every factory that closed in the 1970s. Britain's industrial future lies in advanced materials, precision engineering, robotics, defence, energy systems and the machinery behind modern technology. The question is whether we have the determination to make those things here.
How Britain Lost Its Industrial Strength
Manufacturing accounted for around 8% of Britain's GDP in 2024, compared with 18% in Germany and more than a quarter in South Korea, according to World Bank figures. These are countries that trade extensively with the world. They have simply made different choices about the importance of domestic production.
Britain's industrial decline did not happen overnight. Factories closed, suppliers disappeared and apprenticeships went with them. Decisions that made sense on individual company balance sheets gradually left entire industries dependent on imported components.
Once those skills and supply chains disappear, rebuilding them becomes enormously difficult.
Scunthorpe is perhaps the clearest warning. The National Audit Office's investigation found that keeping British Steel's blast furnaces operating cost taxpayers £377 million between April 2025 and January 2026. It is an extraordinary sum simply to preserve a capability we should never have allowed to become so vulnerable.
Then there is energy. Government figures show that in 2024 Britain had the highest industrial electricity prices among countries covered by International Energy Agency data. For a manufacturer deciding whether to invest in Yorkshire, Germany or elsewhere, that matters far more than another ministerial speech promising an industrial renaissance.
What Our Competitors Understand
Germany's industrial strength is not simply Mercedes, BMW or Siemens. It is built around thousands of specialist manufacturers, many family-owned, supported by skilled workers, universities and regional supply chains.
Its Fraunhofer research organisation operates 75 institutes and research units, helping businesses turn scientific discoveries into commercially viable products. Smaller manufacturers benefit from facilities and expertise they could never afford individually.
Northern Italy offers another lesson. In Emilia-Romagna, Ferrari, Lamborghini and Ducati operate alongside companies producing packaging machinery, hydraulics and industrial automation equipment. The industries are different, but they share engineers, suppliers and decades of accumulated knowledge.
These clusters were not created through a government press release. They developed over generations, supported by investment, technical education and a consistent understanding of what each region did well.
Taiwan provides an even more striking example. In 1987, its government-backed Industrial Technology Research Institute helped establish TSMC, today one of the world's most important semiconductor manufacturers.
Japan continues to support domestic semiconductor production through its trade ministry, METI. South Korea offers targeted investment incentives, while France uses Bpifrance to finance industry and innovation. In 2025, the French institution mobilised €72 billion in financing, investment and export support.
These countries have different economic models, but they share one understanding: industrial capability does not develop by accident.
Britain Still Has the Foundations
Working with mining and commodities businesses in West Africa has reinforced something I believe applies just as strongly to Britain. Finding a resource is only the beginning. Its real economic value depends on processing, reliable power, machinery, engineering and the ability to get a finished product to market.
Britain understands these industries. We still have exceptional engineering firms, research universities, specialist manufacturers and some of the world's most experienced industrial workforces.
What we lack is a sustained effort to bring those strengths together.
The Midlands has advanced automotive and precision engineering. South Yorkshire retains expertise in steel, materials and manufacturing research. Teesside and the Humber possess ports, chemicals and industrial infrastructure, while Scotland has considerable strengths in energy systems and complex engineering.
These are natural foundations for modern industrial clusters.
I would rather see Britain concentrate investment in a handful of regions with genuine competitive advantages than scatter small grants across the country and pretend we have an industrial strategy.
We cannot manufacture everything, nor should we try. But there are capabilities we simply cannot afford to lose, particularly in defence, strategic materials, energy equipment and advanced manufacturing.
The objective should be to build industries that can compete internationally, rather than survive indefinitely on government support.
Making Britain Competitive Again
The first priority must be affordable energy. We cannot expect manufacturers to invest billions in new facilities while electricity costs remain so uncompetitive.
The Government's British Industrial Competitiveness Scheme promises eligible manufacturers savings of up to £40 per megawatt-hour from 2027. That is welcome, but long-term investment decisions require confidence that energy will remain affordable for decades, not simply until the next policy review.
Second, we should strengthen Britain's existing Catapult research centres, giving them longer-term funding and a greater role in helping smaller manufacturers automate, develop products and reach commercial production.
Britain is good at invention. We need to become much better at turning those inventions into things we manufacture and export.
Third, establish a small number of strategic industrial zones, built around existing regional strengths. Give them faster planning decisions, reliable grid connections, technical training and incentives that encourage private investment.
Finance must also play its part. The October 2026 Budget increased the National Wealth Fund's capitalisation to £43.2 billion, with a stronger focus on defence, critical minerals and industrial resilience. That capital should help attract private investment into commercially viable projects, not become another source of politically directed subsidies.
Finally, government should use its considerable purchasing power more intelligently.
Defence procurement is an obvious example. Multi-year contracts for equipment and components could give British manufacturers the confidence to invest in machinery, expand production and train apprentices. We should still demand competitive pricing and value for money, but the cheapest short-term contract is not always the best long-term decision for national security.
Support must come with conditions. Companies should be expected to invest, innovate and become commercially competitive, with public assistance tied to clear milestones rather than endless financial support.
The Return of Industrial Britain
We should not confuse industrial renewal with nostalgia. The factories of tomorrow will be increasingly automated, use fewer workers in some processes and require far greater technical skills. But they can still create valuable employment, support thousands of suppliers and generate substantial exports.
Successful manufacturing also takes patience. Germany, Japan and South Korea did not develop their industrial strengths through five-year political cycles. They invested in skills, technology and institutions that endured.
Britain has the talent, capital markets and engineering expertise to do the same. What is needed is consistency, commercial discipline and a government that recognises industrial capacity as an economic and strategic asset.
We will always trade with the world. But trade is stronger when we have something valuable to sell, and national security is stronger when we can produce the things that matter.
Britain's future should not arrive entirely in shipping containers. We should be building more of it ourselves.
