For the UK government, economic growth is foundational to achieving its plans, but it’s starting 2025 with a low confidence business environment. The latest ICAEW Business Confidence Monitor shows that business confidence fell to its lowest level since 2022 in quarter four last year, dropping from +14.4 in the previous quarter to just +0.2. This was largely a response to tax raising measures in the October Budget. 

In response, the government is pursuing a ‘growth-first’ agenda in 2025, starting with its Industrial Strategy. There have been positive noises around the announcement of the strategy, its focus on eight ‘growth-driving’ sectors and its acknowledgement of the need for a consistent 10-year timeline.

But the strategy on its own is not enough to deliver the growth that the UK needs. “The government says it is willing to pull all levers in a quest to achieve growth,” says ICAEW Director of Policy John Boulton. He joined a Fabian Society panel that included Sarah Jones MP, Minister of State for Industry, and entrepreneur Mike Souter, to discuss what needs to be done to ensure consistent growth in the UK.

Skills, stability and data

The Industrial Strategy should support businesses to grow and create good jobs. That requires a complementary drive to develop the right skills across the UK workforce. “We’ve got skill shortages in the UK,” says Boulton. “There needs to be more investment in skills. The indication is that investment into workforce training has been declining over time and, as artificial intelligence comes in, that’s not a trend that the country needs to continue. We need to invest in skills and we need more people in the economy with skills at a higher level.”

The strategy also needs reliable KPIs and reporting in order to effectively measure its success. The government needs to ensure that it is monitoring the right metrics, with proper reporting and assurance over that data. 

Previous industrial strategies have tended to be overly complicated and too focused on technical matters that, while valid, were insufficiently material to move the dial. This is a big reason why they did not succeed. Focusing on fewer things and connecting the strategy with allied strategies for skills, trade and SMEs will help this strategy deliver, says Boulton. 

“The government has identified eight priority sectors for its Industrial Strategy early on. That’s a very positive thing,” he says. “There is also real focus from this government in being innovative and reinvigorating the approach to trade. That's also very positive. But we haven’t seen much on the skills side and what we’ve heard about cutting investment in higher level skills doesn’t bode well in that regard. At the end of the day, a lot of this is about people.”

Audit and corporate governance reform can provide stability 

Resilience and stability is inherent in growth, says Boulton, so audit and corporate governance reform is important as part of the growth agenda. Growth is not only about nurturing new businesses – it’s also about stability in the major national institutions that the economy relies on. The system needs strengthening to reduce the risk of a major institution going bust without warning. When that happens, small suppliers and employees are often caught up in the fallout.

As well as stability, audit and corporate governance reform is also about building trust in UK markets. “If we have trust in our markets, we attract investment,” Boulton says. “This is not about regulation to slow things down. This is about regulation to create the conditions for stability and encourage more investment.” 

Growth is about trust, a fact that is often lost in UK messaging around capital market regulation. “To achieve this, we need a respected regulator with statutory powers,” Boulton says. With its focus on investor protection, the Security and Exchange Commission in the US offers a good example of how this can work.

A balance between regulation, innovation and growth

Last week, the government announced it was taking a serious look at how regulation is used in order to encourage growth, a topic discussed extensively at the Fabian event.

“We recognise that there can sometimes be a trade-off between regulation and growth, but stable economies need smart regulation,” says Boulton. “Giving regulators the right powers is pro-growth.”

While the government hasn’t come up with a perfect solution – and neither have other world leaders – the Industrial Strategy is a promising start. ICAEW has compiled insights from its members across the country’s various business sectors and is feeding that knowledge to the government in its interactions with MPs. 

“We’ve got some great businesses in the UK,” Boulton concludes. “A number of our members are involved in those businesses and they are very confident that they know how to generate productive business opportunities. They don’t necessarily need the government to tell them how to make money; they know about that. What they do need, particularly in certain sectors, is stability in policy.”