“Any control which fatally hampered or handicapped industry would, in any Western nation, and especially in one so highly industrialised and so dependent on manufacture as Great Britain, deal a blow of the gravest character to the national existence”

Royal Commission on the Distribution of the Industrial Population, 1940^[i]

Foreword

The Tees Valley has a stronger link to British manufacturing than most. Since the Industrial Revolution, Teesside has been home to chemicals, manufacturers, materials and energy firms and, of course, British Steel’s manufacturing hub in Skinningrove.

Despite this proud history, industry in Britain has, for many years, been competing with one arm tied behind its back. As shown in this excellent paper, ministers spent decades trying to direct industry away from the locations that made the most sense for businesses. In recent years, the additional costs and levies placed on industry has made our energy the most expensive in Europe, a fact I am only too familiar with from speaking to investors and business owners in Teesside.

Addressing this will require bold solutions, and I am glad that Onward has stepped forward to offer them in this timely report. From my work chairing the South Tees Development Corporation, I have seen first hand how the right systems of devolution can empower local leaders to deliver transformative investment, changing the fortunes of their local communities and the lives of the people in them. But as this paper sets out, local leadership can be frustrated by policy problems that only Westminster can alleviate – our creaking energy network and national over-regulation of construction being just two examples.

This paper, which builds on the lessons from the Tees Valley as well as the best examples from around the world, provides a valuable and welcome contribution to the continuing debate on how to revitalise British industry. I hope that the Government, the Conservative Opposition, and any political parties interested in that topic will give it careful reading.

~ Lord Houchen of High Leven, Mayor of the Tees Valley

Executive Summary

Supporting British industry has been a priority for British Governments for decades. The UK Government had a Secretary of State for Industry continuously from 1970 until 2007. Theresa May revived the title in 2016, under the auspices of the Department for Business, Energy and Industrial Strategy. Since then, successive Governments have published a dizzying array of plans, policy and frameworks, with Labour ministers having issued their Modern Industrial Strategy in June of this year.

This prioritisation has stemmed from the long-term decline in British manufacturing and industrial sectors, with the share of UK GDP taken by manufacturing having more than halved in just the past 20 years. This has had a significant impact on geographic inequality, with the average London worker now 50% more productive than the average in former powerhouses of global industry like the Midlands.

This deindustrialisation is despite the UK being extraordinarily well-placed for a renaissance in capital intensive, R&D sectors – home to world-leading research, as well as being the third largest destination for venture capital investment on the planet, often raising more than twice as much as other major European countries.

Government attempts to address the problems have not worked because policymakers have been looking in the wrong places. Decades of policy failure have prevented British firms from having access to the core ingredients for industrial businesses: plentiful space for R&D and manufacturing, and cheap, reliable energy.

This failure has been significantly the result of choices by politicians. A system of national and local land control that intentionally rationed space for businesses to expand or invest, as well as politicians who frequently saw industry as merely a tool to tackle unemployment, rather than vital to Britain’s economic performance. An unreformed system of environmental regulation that forces every developer to spend months undertaking detailed surveys and assessments, all with no guarantee of being able to build anything once they’re done. Policymakers loading up businesses with policy and network costs to pay for green subsidies and grid expansion, even as prices soared above that of European comparators.

The combination of these forces has led to an extreme shortage of the infrastructure and built environment necessary to create the industries of the future. In just data centers and laboratories alone, the UK is missing approximately £60bn in capital investment relative to the US.

To revitalise Britain’s industrial sectors, as well as prepare it for the technology sectors of the future such as life sciences and AI, there needs to be radical reform, to create new industrial zones with different governance, regulatory and energy arrangements to the rest of the country. These could be located all across the great cities and industrial areas of Britain, including the North and Midlands, as well as the Greater South East.

The specific proposals in this paper are all based on extending existing government policies, or robust international examples. They are:

• Governance of Industrial Zones – Creating new, geographically defined industrial zones, in which elected regional mayors,  not local councils, will be responsible for local planning decisions and policy frameworks. Planning requirements set by local authorities will be removed. This will result in democratically elected mayors, representing an entire economic agglomeration, making policy decisions.

• Regulation of Industrial Zones – Within industrial zones, national regulations on environmental impact assessments, wildlife conservation and statutory consultation will either be significantly streamlined or removed. The capacity of groups to challenge the granting of permissions via Judicial Review will be significantly curtailed, as will authorities’ abilities to slow down development through enforcement of noise complaints. This will significantly reduce the time, cost and legal uncertainty associated with development.

• Energy Systems in Industrial Zones – Development within industrial zones will be prioritised for grid connections, using powers the Government is currently introducing via the Planning and Infrastructure Bill. Localised energy generation will also be facilitated and encouraged, with industrial developers able to purchase behind-the-meter energy from nearby generators – including new gas generators – without needing to go through the grid and pay exorbitant policy and network costs. This will result in industrial sites inside industrial zones having faster, and far cheaper, access to energy.

Table of Recommendations

Introduction

“[The UK] is just missing one thing. It is surprising – this is the largest AI ecosystem in the world without its own infrastructure”

Jensen Huang, NVIDIA CEO^[i]

“The Nissan plant in Sunderland pays more for its electricity than any other Nissan plant in the world”

Alan Johnson, Nissan SVP^[ii]

Industry is at the heart of Britain’s economic history. Britain was the birthplace of the Industrial Revolution and, by 1948, manufacturing constituted 36% of its GDP.^[iii]

However, the UK has not been immune to the global pattern of declining industrial and manufacturing sectors in developed countries since the end of the Second World War. By 1980, manufacturing had fallen to 27% of GDP. Since then, this process has continued and in the past 20 years alone, manufacturing has more than halved as a share of total UK economic activity.^[iv]

This fact alone does not constitute an argument for attempting to re-capture the industries of the past. Much of the industry that has moved to other countries – such as coal mining, or textile manufacturing – is not coming back and nor should it. The question is how the UK can be best placed for the next technological revolution, taking advantage of our world-leading R&D and venture capital ecosystem.

The opportunity for the UK to be a future technological powerhouse is immense. Across Europe, the UK alone accounts for more than one quarter of all venture capital fundraising, and 30% of all European venture capital investments.^[v] In 2023, the UK became the third largest venture capital market in the world, overtaking India and seeing a higher share of global VC deals than Germany, France and Canada combined.^[vi]

In key sectors such as life sciences, deeptech and other R&D intensive sectors the UK often receives more than twice as much investment as major European countries.^[vii] In addition, the UK is the third-largest AI market in the world, with a tech sector worth more than $1 trillion.^[viii]

Figure 1: Late stage venture capital investment in other G7 countries as a % of UK in key sectors

Source: British Business Bank^[1]

The question is how the UK can make the most of this extraordinary potential.

Policy failure is holding UK industry back

Currently, these growth industries are being hamstrung by a policy framework that does not provide the basic inputs that industry needs – rapid delivery of plentiful space for R&D and manufacturing, and cheap, reliable energy accompanied by rapid grid connections. These requirements are particularly pronounced for these promising UK industries – which “often [have] complex and costly infrastructure requirements, that often go above and beyond generic business R&D needs”. ^[2]

As a result of overlapping policy failures, the UK has an extreme shortage of the infrastructure and built environment necessary to create the industries of the future. In relation to data centres and laboratories alone, the UK has approximately £120bn in missing capital investment relative to the US – even adjusting for the latter’s larger size.^[3] This total doesn’t include missing manufacturing or electricity infrastructure.

As is shown in this paper, these shortages of both industrial space and energy are the result of intentional and accidental policy choices in several key areas. These include – unsurprisingly – the UK’s land use framework, covering both the governance of land allocation and the national regulation of environmental protection, and the structure of the UK’s energy system.

For example, politicians in the 1940s and onwards undertook a deliberate policy of dismantling the UK’s industrial base through rationing access to land. Over decades, politicians repeatedly defended these policies, explicitly arguing that they knew better than factory owners or investors where industrial resources and jobs should be placed. This mistaken denial of market forces was repeated with energy and the UK’s net zero policies so that today the difference between the UK’s price of industrial energy and that of comparator countries is almost entirely down to policy or network costs.

These policy failures have had profound consequences for the UK’s economic performance. De-industrialisation has contributed to the UK’s North-South divide, with the average Londoner 50% more productive than the average worker in the Midlands. Nationally, this represents hundreds of billions of pounds in lost incomes and economic activity, as well as an enormous waste of opportunity for the people of these regions.

Figure 2: Output per hour worked relative to UK average, 2023 (UK average = 0)

Source: ONS^[4]

Expanding economic opportunity across the entire country means supporting the UK’s industrial base. While London is at the heart of Britain’s service economy, it was the Midlands^[5] and the North^[6] that powered Britain’s industrial rise. Venture capital-backed jobs – meaning those in high growth companies backed by investors and skewed towards the industries of the future –  in the UK are not just in the greater South East – the North West has approximately as many venture-backed jobs as in the East, the region containing Cambridge.

Figure 3: Employment across venture capital backed businesses by nation and region (excluding London)

Source: BVCA^[7]

Creating the conditions for industrial expansion is therefore not just about delivering benefits to the regions which are already relatively affluent. By supporting economic activity across the country, reindustrialisation would help address the disparities central to the UK’s underperformance, combatting the relatively low productivity of Britain’s second cities and their lack of knowledge-based jobs.^[8]

1. Addressing the challenge of de-industrialisation

The ambition of British reindustrialisation was articulated in the Labour Government’s recent Industrial Strategy document,^[9] which noted that “National economic growth will only come from increasing the productivity of places across the UK, many of which underperform relative to their international comparators.”

However, despite the Industrial Strategy document’s positive language, there is very little by way of policy solutions to deal with the most pressing challenges to the UK’s industrial expansion.

On energy, the document contains a limited set of reliefs from policy costs for certain categories of energy users, such as steel, ceramics and chemicals.^[10] This alone will not lead to the construction of new energy sources. On planning, the Government relies on measures in the Planning and Infrastructure Bill^[11], which do not fundamentally reform the incentives or structures of the veto-ridden local planning system. Moreover, there are no substantial reforms planned to the paperwork-ridden and time-consuming system of environmental or wildlife protection, which even the UK’s Office for Environmental Protection has described as “unnecessarily burdensome, causing expense and delay”.^[12]

The ambition articulated in the Industrial Strategy, therefore, is short of the radical, wholesale reform that is needed. It does not adequately address the challenges faced by the UK as it enters the middle of the 21st century.

Trade-offs and prioritisation are necessary to reindustrialise

Ultimately, the principle underpinning the approach advocated by this paper is that political reality requires prioritisation. There is broad agreement across the political spectrum that growing UK industry and jobs is very important –  and therefore that also means that it is more important than some other issues.

In particular, more industrial activity will require a rapid increase in the UK’s energy usage. This paper is neutral on what the sources of that energy will be. However, constraints around the intermittency of renewables and the long timescales required to build nuclear power stations (averaging at more than a decade^[13]) mean it is likely not feasible for cheap, market-driven energy supply for industrial use to be generated by carbon neutral sources alone.

What does system reform look like?

To address these problems, the Government should create a new generation of industrial zones – geographically-specific areas across the country in which the governance, regulatory and energy rules are changed or relaxed. These would have local mayors, rather than councils, act as planning authorities for development; radically reduce the scope of time-consuming national environmental and wildlife rules; and allow the construction of co-located energy generation which can supply power without needing to go via the national grid.

If done correctly, these would address three of the major causes of deindustrialisation: anti-development and uncertain planning rules, lengthy and time-consuming pre-construction administrative processes, and high energy prices driven by policy and network fees. Industrial zones would radically improve the investability, deliverability and finances of development in these areas, supporting expansion, economic revitalisation and jobs.

2. The Governance of Industrial Zones

This discretionary system has led to a catastrophic shortage of economic infrastructure across the entire country, fundamentally caused by the refusal to permit market-led development except in narrow circumstances. As a result, the UK is suffering from a simultaneous shortage of laboratory space,^[14] data centres,^[15] logistics and industrial facilities,^[16] and, of course, housing.^[17]

This shortage is caused by the political incentives that are hard-wired into the architecture of these systems. The local system of planning permission is controlled by local councils, who are elected on tiny mandates^[18], with electoral wards of only a few thousand people.^[19] As a result, councillors are highly influenced by small groups of motivated residents mobilising against development. Investment decisions by national politicians, as shown by HS2, are prone to gold-plating, negotiation with Parliament, and a rotating cast of ministerial decision-makers with different priorities.^[20]

This system of control was explicitly conceived to grant powers to national and local politicians to constrain development and unwind the agglomeration of both industry and economic activity. Preventing economic growth isn’t an accidental feature of national or local planning. It’s the system doing what it’s supposed to.

Neither national nor local control of industrial land use has worked

The instincts of national politicians have historically been to grant themselves a veto over the formation of industrial clusters. The modern planning of industrial development in the UK began with the Barlow Commission into “The Distribution of the Industrial Population”, which commenced work in 1937, but did not publish its final report until 1940, after the start of the Second World War. The objective of the report was:

“To inquire into the causes which have influenced the present geographical distribution of the industrial population of Great Britain… to consider what social, economic or strategical disadvantages arise from the concentration of industries or of the industrial population in large towns or in particular areas of the country; and to report what remedial measures if any should be taken in the national interest”^[21]

The Barlow Commission concluded – in response to concerns about the threat of aerial bombing, as well as environmental and health risks – that “in the case of congested [industrial] conurbations, decentralisation or dispersal is the right policy, and… further growth of industry in them is to be ‘discouraged’”.^[22] A proposed National Industrial Board was to be tasked with this dispersal.

After the Second World War ended, this proposal was incorporated into section 14(4) of the Town and Country Planning Act 1947. The Barlow Commission’s ideas were the genesis of this proposal: the report was named no fewer than ten times by Lewis Silkin, the Bill minister, during his speech introducing the Bill’s Second Reading in the House of Commons.^[23] The legislation stated:

“[a]n application to the local planning authority for permission to develop… an industrial building… shall be of no effect unless it is certified by the [Board of Trade] that the development in question can be carried out consistently with the proper distribution of industry”.^[24]

But the 1947 Act was also intended to empower the anti-growth sentiments of hyper-local decision-makers: local authorities. It thwarted the outward expansion of the UK’s towns and cities. Silkin made this point explicitly, saying:

“Nor must our already large towns be permitted to sprawl, and expand, so as to eat up the adjacent rural areas… Green belts must be left round towns… The continued drift from the countryside must be arrested”.^[25]

National politicians used industrial land control to try to drive social outcomes

With the passage of the 1947 Act, the instincts of national and local politicians to prevent the development of industrial clusters had been achieved. It had given ministers a veto over new industrial development with the stated goal of breaking up the UK’s industrial clusters and redistributing economic activity in the face of market forces. And for all other development, it had built a system explicitly intended to prevent new construction around existing areas.

The stated purpose of the national government granting itself a veto over industrial development through the industrial development certificate (IDC) regime described above was to ensure the “proper distribution of industry” throughout the country. But what did ministers think was the proper distribution of industry?

From the beginning, national politicians were clear that the proper distribution of industry was that industrial clusters should be broken apart. The list of Development Areas in Schedule 1 of the Distribution of Industry Act 1945^[26], which permitted direct Treasury support for industry in these locations, is indicative. None of the listed areas included the UK’s great cities. Manchester, Birmingham, Leeds, Sheffield were all excluded.

This anti-agglomeration instinct endured between governments. By 1960, Development Areas had been renamed Development Districts by the Local Employment Act 1960, with an updated list provided by the Conservative then-President of the Board of Trade, Reginald Maudling, to the House of Commons.^[27] While the entire county of Cornwall had largely been added to the list of areas into which the Government wished to direct industry, the historic centres of UK industry were still missing.

The Local Employment Act 1960 also required that the Government “have particular regard to the need for providing appropriate employment in development districts” when issuing IDCs.^[28] This view, that the anti-market powers of the IDC regime would, if used properly, lead to increased employment in disadvantaged areas, was now law.

Ministers of all parties would repeatedly express this view as they used the IDC regime to prevent development in developed areas. When asked in 1961 to respond to the view that “investment could be distorted, and that there is a real risk that if a company does not get a new factory in the area of its choice it may go abroad”, Reginald Maudling said:

“It seems to me to be a good thing both economically and socially to try to guide industrial developments into areas where people are available for employment, rather than increasing the shortage of labour in other districts.”^[29]

When market forces tried to get around the law, politicians tightened the law. A few years later in 1965, Labour Ministers would defend the lowering of the threshold of industrial development requiring an IDC to just 1,000sqft (from a previous threshold of 5,000sqft). As a result of the change, the Government now had a veto over any industrial site or expansion larger than a ten metre by ten metre box. In response to the suggestion that the Government “are returning more and more to controls for controls’ sake without any resultant benefit”, George Darling, the Minister of State at the Board of Trade, robustly defended the policy’s effect of preventing industrial expansion, saying:

“First and most encouraging is that speculative building in the wrong places… has now completely stopped. The other is that we have been able to steer… a small but very valuable proportion… to far better sites than they would otherwise have had.”^[30]

The precise specifications of development that required an IDC changed over time. However, the basic principle that any major industrial development was subject to ministerial veto remained until 1982^[31], when it was removed by the Thatcher Government. This removal was on the grounds that, despite that Government relaxing the policy “substantially” a few years earlier, the IDC requirements themselves were “a psychological barrier to investment, unnecessarily delay the planning process and are detrimental to industrial efficiency”.^[32]

Both national and hyper-local political control of land use have crushed British industry

Evidence shows that when an IDC was rejected, the overwhelming majority of responses by investors were either to reduce their plans, abandon them, or close the factory altogether.^[33] The possibility of rejection inherent in the IDC regime also had a huge impact on decision-making by investors. Of investment in Development Areas that arose after the original proposals were blocked in the South East, up to 83% was explicitly linked to the IDC regime and threat of rejection.^[34]

With the end of the IDC regime, control of industrial development passed to the local planning system. This has been left largely unchanged from the 1947 Act, with its explicit purpose of preventing expansion into the countryside and restricting access to space. As a result, industrial development in the UK since 1947 has been based on policy systems with a complete mismatch with how today’s economy works, enforced by politicians who mistakenly try to direct industry into inappropriate areas.

Consequently, land for industrial, scientific or R&D development is severely constrained. History shows that national politicians have repeatedly failed to responsibly use their powers to direct development. Local councils are the central actors in the existing, failed planning system – which was designed with the express purpose of preventing new development. As shown below, they have imposed thousands of pages of useless paperwork on industrial and R&D development, costing investors huge sums of money and months of time. Moreover, every single planning reform in the last 20 years has boosted development only insofar as it has taken power and discretion away from local councils.^[35]

Reindustrialising Britain therefore requires that power be devolved to a different kind of policymaker.

Recommendation 1: Create mayor-run Development Corporations for the purposes of reindustrialisation, covering a geographically-defined area of up to ~14sqkm

As shown above, neither national nor local authority decision-makers have demonstrated that they are reliably able to responsibly use existing planning powers. To solve this, the Government should approve and create Development Corporations – geographically defined areas for which the Development Corporation, rather than the local authority, is the sole planning authority^[36]. To ensure democratic accountability, these should be headed by the local mayor, and tasked with the specific purpose of facilitating and approving industrial and scientific developments in an area of up to 14 square kilometres, based on the Hsinchu Science Park, detailed in a case study below.

International Case Study: Hsinchu Science Park, Taiwan   The Hsinchu Science Park was set up in 1980 by the Taiwanese government as a destination for capital intensive, R&D-based businesses and industry, covering ~14 square kilometres.[37] It is home to the world-leading semiconductor foundry TSMC, as well as almost 200 companies specialising in integrated circuits, and a further 154 in biotechnology.[38] The number of employees in the science park has significantly increased over time, to more than 150,000 today. [39]   Figure 4. Hsinchu Science Park employees over time (1987 – 2010) Source: You-Lin Tsai, April 2015 At the park’s inception, management of the park was handed to politicians responsible for the entire economic unit, with the then-Minister of Economic Affairs having overall responsibility. Planning was led by teams reporting to the minister, rather than local officials.[40] The Park authority was also responsible for infrastructure development within its borders, to coordinate construction with the needs of investors and industry.[41] Land was also acquired and parcelled by the state to facilitate development.[42]

Urban Development Corporations can align economic and political incentives

Urban Development Corporations can currently be created by statutory instrument under the Local Government, Planning and Land Act 1980^[43]. The fact that they were intended to prevent local authorities from blocking development , was recognised during the Second Reading of the 1980 Act, during which a MP commented that “If ever there was a case of flagrant disregard for local democracy, it exists in the proposals for the urban development corporation.”^[44]

Despite this criticism, the UK has a long history of using development corporations to break local authority vetoes and to secure significant redevelopment. These include:

• London Docklands Development Corporation (LDDC): Created by statutory instrument in 1980^[45] covering approximately 20 square kilometres of inner East London land which had fallen into dereliction in the decades after the Second World War. The first Chief Executive of the LDDC was Reg Ward^[46], who had previously served as a local authority chief executive, rather than in elected office. The result was the transformation of the Docklands, with more than 16m sqft of office space developed and more than 100,000 jobs in Canary Wharf alone^[47].

• Merseyside Development Corporation (MDC): The MDC was created through similar authority under the 1980 Act, and covered some 3.5 square kilometres^[48]. The MDC was tasked with the “the substantial task of regenerating the designated area by bringing land and buildings into effective use, encouraging development, upgrading the environment and stimulating private investment”^[49]. The MDC was responsible for the redevelopment of, among others, the Albert Docks^[50], which was at the centre of Liverpool’s former World Heritage Site. A report by the National Audit Office found that the MDC was responsible for 22,000 new jobs, galvanised £700m in private sector investment, and for almost 700,000 sqm of commercial development.^[51]

• Milton Keynes Development Corporation (MKDC): Milton Keynes was a New Town created under the New Towns Act 1965, with the MKDC created as the vehicle through a statutory instrument in 1967.^[52] The MKDC operated for 25 years, covering 89 square kilometres, and planned for the population of Milton Keynes to increase from 60,000 to 250,000. As a result of the removal of planning powers from the local authority, “the working relationship between MKDC and the local authorities was minimal”. However, in the Council’s own admission, “total [housing] completions after 1992 rarely reached the levels achieved during the MKDC period”.^[53]

The Government has already accepted the principle of moving planning powers from local authorities to regional mayors. In the English Devolution Bill, which is currently passing through Parliament, the Government is proposing giving new mayors powers to issue planning permissions for specific developments in their areas, as well as removing the current veto held by local authorities over the granting of that permission.^[54]

Using development corporations run by the local mayor has three benefits:

• Breaking the local authority veto over development, yet retaining a local democratic element in planning through the mandate of the directly-elected mayor.
• Preventing national politicians from blocking or mismanaging development at a local level.
• In time, facilitating geographically-defined master planning, providing a stable and predictable environment for investment decisions.

Ministers should also use other existing powers to ensure the smooth running of Development Corporations and that their purpose is to facilitate industrial development, such as:

• Disapplying industrial zone Development Corporations from the requirement to prepare a local plan, using powers under Section 33 of the Planning and Compulsory Purchase Act.^[61]
• Creating a presumption in favour of the use classes that constitute industrial development – including General Industrial (Class B2) and Storage or Distribution (Class B8) and R&D (Class E)^[62] – with industrial zone-specific National Development Management Policies through Section 93(2) of the Levelling Up Act 2023.^[63]

Recommendation 2: Existing local authority-set ‘validation requirements’ should be disapplied for development inside these development corporations

In addition to issuing the specific consents for planning permission, local authorities are also able to set their own local framework for deciding how the decisions will be taken. This power exists under the Town and Country Planning Act, which grants local authorities the power to “require that an application for planning permission must include such particulars as they think necessary”^[64]

In practice, this results in local authorities setting long lists of additional assessments and reports that it considers necessary to properly submit a planning application – called local validation requirements. These also add significantly to the uncertainty associated with an application – more assessments and requirements means developers are less confident that they will be able to secure overall permission to build out on their site.

Local validation requirements vary from local authority to local authority, but often run to thousands of pages, and can constitute the majority of paperwork required for a planning application. Lawyers and development managers confirmed that these paperwork requirements often recreate a significant part of the fieldwork needed for an EIA – such as landscape, air quality or arboricultural assessments – meaning that even where development has been screened out of needing an EIA, local policies will still require a large portion of equivalent time and money to be spent.

From dozens of planning applications analysed for this paper, local validation requirements can represent more than 75% of the paperwork needed for an application. These included:

• Expansion of the UK Atomic Energy Agency, South Oxfordshire District Council^[65] – For the application to build a fusion demonstration plant, 3412 pages – or 83% of the more than 4,000 pages of total paperwork required – were due local validation requirements. This included hundreds of pages of visual impact, noise and archeological assessments, as well as a contaminated land assessment. This was all despite the development being screened out of requiring an Environmental Impact Assessment.

• Kao Data Centre, Stockport Metropolitan Borough Council^[66] – Local Validation Requirements constituted 91% of the more than 2,500 pages needed for development consent. Of these, 1577 pages alone were for an environmental statement, despite the development being screened out of requiring an Environmental Impact Assessment.

Of the dozens of applications analysed in this paper, 71% of the total paperwork from an entire application was accounted for by the combination of local validation requirements and Environmental Impact Assessments.

Many local validation requirements are often of questionable relevance to the development, or should properly be handled by local authorities themselves. Local authorities can require flood risk assessments, even at sites that are not deemed to be at national risk of flooding. Contaminated land assessments are also often needed, despite developers having a clear and overwhelming interest in not rendering their own site unusable through spreading contamination.

Detailed transport assessments and travel plans are required by a combination of local policies and national guidance, despite the entire purpose of the plan-led system being that the local authority is supposed to have already anticipated the impact of development on transport demand.

International examples where these local requirements have been removed have resulted in a rapid decrease in build timelines.

The solution is to remove local validation requirements for development in industrial sites using existing powers to create National Development Management Policies (NDMPs) in the Levelling Up and Regeneration Act 2023.^[71] NDMPs can be issued via statutory instrument^[72], and over-ride local development policies when they come into conflict.

A statutory instrument could powerfully disapply existing local authority validation requirements, while permitting mayors to issue new policies if they chose. For industrial zones, this would result in mayors starting with a blank slate, but able to reflect the priorities of the entire economic unit that represents

Other countries have already started taking steps to streamline processes and remove uncertainty from consenting and planning processes. The UK should follow their example.

3. Removing Regulatory Barriers in Industrial Zones

While the local planning system, its incentives and rules are a significant barrier to development, these can fundamentally be overcome with a willing set of local decision-makers. However, local decision-makers cannot overcome the national regulatory framework, which also imposes enormous costs and delays on developers.

These costs and delays are particularly created by rules governing environmental and ecological assessment – specifically Environmental Impact Assessments, Habitat/Ecological Assessments, and Biodiversity Net Gain.

Environmental Impact Assessments create barriers to development

Environmental Impact Assessments (EIA) are the mechanism through which the impact of a proposed development on the environment is assessed before an application is made. The current regulatory framework is detailed in the Town and Country Planning (Environmental Impact Assessment) Regulations 2017^[73] (the EIA Regulations). Regulation 3 of the EIA Regulations contains an explicit prohibition on any major development (defined in the Schedules of the EIA Regulations) unless an EIA has been conducted, or a ‘screening opinion’ has been acquired concluding that an EIA isn’t necessary.

The EIA regime fundamentally stems from retained European Union law, with the UK’s EIA Regulations being the domestic incorporation of the EU’s EIA Directive.

In recent years, the paperwork required by the EIA regime has ballooned. A government review in 2023 concluded that “contrary to the intentions of the regulations, there is still evidence of high costs and significant administrative burden associated with conducting an environmental assessment under the [EIA Regulations]”. Examples given in the review include “an average environmental statement for a 500-home development cost £150,000-£250,000; took 8 – 18 months to complete; and ran to 4,350 pages”^[74]. These costs have expanded in recent years – “A review of recent projects… shows a range of 56-267 for the number of documents submitted in the corresponding environmental statements, compared to 55-96 documents for projects submitted before 2017.”^[75]

This extraordinary length is also seen by research conducted for this report. The EIA for a laboratory development in Whitechapel, London, ran to 3,673 pages^[76]. Another for a data centre in Newham was 3,070 pages long^[77].

Planning consultants and development directors told us that the EIA process was so burdensome that sites were frequently chosen for the specific purpose of avoiding needing to do an EIA. One lawyer said that developers preferred land which was chemically contaminated over land where development would need an EIA. In other words, the existing EIA process imposes such high costs that it is directly distorting investment in the UK’s physical and economic infrastructure.

The EIA regime’s flaws derive from expansive legal principles

Multiple planning lawyers consulted for this report explained to Onward that the fundamental causes of the burdensome and expansive EIA process are the regulations themselves, and their interpretations by the UK’s courts. There are two causes:

1. Principles from the EU EIA Directive from which the UK’s EIA regulations are derived
2. Unclear drafting in the UK’s EIA regulations

First, the EU EIA Directive (from which the EIA regulations are derived) describes a regime that is procedural, rather than substantive. The key question for an EIA is whether the right process has been followed, rather than whether the right outcome has been reached. In the words of Lord Leggatt, giving judgment for the Supreme Court in R (Finch) v Surrey County Council,^[78] the EIA regime is “essentially procedural in nature. It is not concerned with the substance of the decision… but with how the decision is taken”.

One of the key questions embedded in the EIA regime is whether there has been effective public involvement in the assessment of any decision-making. Again, this is not because public involvement would necessarily lead to a different outcome, but rather because public participation is seen in the EIA regime as inherently worth achieving. This stems from recital 16 of the EIA Directive:

“Effective public participation in the taking of decisions enables the public to express, and the decision-maker to take account of, opinions and concerns which may be relevant to those decisions, thereby increasing the accountability and transparency of the decision-making process and contributing to public awareness.”^[79]

This was summarised by the Supreme Court as meaning that “public participation is necessary to increase the democratic legitimacy of decisions… the public participation requirements serve an important education function, contributing to public awareness of environmental issues”.^[80]

These principles, derived from the EIA Directive, mean that what is termed an Environmental Impact Assessment does not actually have the purpose of informing decision-makers about relevant impacts on the environment from a proposed development. Instead, it is an exercise in “democratic legitimacy” and of “public awareness” – essentially an information campaign legally required of private companies as a precondition of development.

But poor drafting makes the regime sprawling and unpredictable

Second, the UK’s EIA regulations are drafted unclearly, in a way that lends itself to an ever-increasing regulatory burden.

EIA Regulations do not impose an exhaustive list of topics that should be included in an EIA. Rather, the regulations state that information should be included on twelve different categories of effects. These categories are^[81]:

• Direct effects
• Indirect effects
• Secondary effects
• Cumulative effects
• Transboundary effects
• Short-term effects
• Medium-term effects
• Long-term effects
• Permanent effects
• Temporary effects
• Positive effects
• Negative effects

Much recent litigation has been about the precise meaning of these terms, which is not defined anywhere in the regulation itself. A recent ruling by the UK Supreme Court^[82] ruled that the “impact on climate of the combustion of the oil” produced by a well site in Surrey needed to be included in the EIA as an “indirect” effect of the development. Because it was not included, the EIA for the proposed development was incomplete, and the grant of planning permission was quashed.

This expansive view has in part been formalised in the “Rochdale Envelope”, which requires that developers should consider a “cautious worst case approach”^[83], with Government guidance noting “the more detailed the [EIA] is, the easier it will be to ensure compliance with the Regulations”.^[84]

EIA rules require developers to try to do the impossible

The case law is unambiguous that information which makes absolutely no difference to a final decision on a project must, nevertheless, be included by developers. This is not an exaggeration – the UK Supreme Court recently ruled that:

“The fact (if it be the fact) that information will have no influence on whether the project is permitted to proceed does not make it pointless to obtain and assess the information [for an EIA].”^[85]

The above factors – EU-derived principles recasting EIAs as exercises in democracy and public education, and a poorly drafted EIA Regulation which facilitates an ever-expanding list of environmental considerations – mean that EIAs are an expanding and unpredictable burden on development in the UK.

In effect, the EIA regime requires developers to do the impossible. Rather than prove that they have considered the environmental impacts of a development, they need to prove that there is nothing that they have not considered.

Habitat and Ecological Assessments require pointless, time consuming surveys

In addition to the Environmental Impact Assessment regime, another nationally mandated regime of nature protection is the assessments required by the UK’s rules protecting wildlife. Major pillars of the current framework are the Conservation of Habitats and Species Regulations 2017^[86] (the Habitats Regulations), and the Wildlife and Countryside Act 1981.^[87]

Whereas the EIA regime is focussed on detailing information about environmental impact, the Habitats Regulations and 1981 Act specifically relate to the impact on wildlife habitats. In effect, these laws protect certain species of wildlife, and sites of particular ecological interest. Developers must prove – before securing planning permission – that their proposals either do not impact on protected species, or that this impact is being mitigated by features of the development. Each development is assessed on its own terms.

In practice, this means that each proposal for development has to undergo a lengthy survey process to determine what level of protected wildlife is present, if any.

An example of this process can be seen in Natural England’s guidance on bats^[88], which notes “all bat species are European protected species protected under the Conservation of Habitats and Species Regulations 2017”, adding that:

“A [bat] survey is needed if one or more of the following applies…

• The development site includes or is close to any built structures…
• The development site includes or is close to trees, shrubs, rock formations, quarries, natural cliff faces or water bodies…
• The development proposal includes lighting of buildings or green spaces close to habitats that bats tend to use…

Absence of a record does not mean there are no bats.”

If evidence of bats is found, developers need to either redesign their proposal so as to avoid “negative effects on bats” or, if that is impossible, to “include adequate mitigation or, as a last resort, compensation measures”. The results of this onerous and inflexible process have been subject to public criticism, most notably with the infamous HS2 bat tunnel.^[89]

In addition to bats, other species specifically protected in law are listed in the Habitats Regulations and the 1981 Act. These include:

• All wild birds^[90]
• Great Crested Newts^[91]
• Otters^[92]
• Water Voles^[93]

More surveys means more delays

However, the habitat protection regime has major costs, even when development is proposed in areas that have no protected wildlife at all. This stems from the requirement – imposed on every proposal – to assess the extent to which protected wildlife is present on the site as a precondition of even submitting a planning application. Determining this requires an extraordinary number of professional surveys, taking place over months and in different seasons, adding huge delays to development.

For example:

• The Ellison Institute of Transformative Medicine, Oxford^[94]. In 2023, the Ellison Institute proposed partially demolishing Littlemore House, a building that was already part of the Oxford Innovation Park estate. Despite this building both already existing, and being directly adjacent to the rest of the science park as well as the A4074, surveys were necessary for badgers, bats, birds and great crested newts. In particular, bat surveys were taken over a period of ten months: with no fewer than ten individual surveys just for bats in total in May, June, July, August, September, October and December 2022, as well as January, February and March 2023.

• NXQ, Manchester^[95] -A regeneration in the heart of Manchester, with the plot directly bordering the inner city, five-lane ring road of Great Ancoats Street, replacing a pair of existing, derelict warehouses. Nevertheless, securing approval required eight in-person surveys for bats, taking place over a period of eight months.

• Former Skelton Grange Power Station, Leeds^[96] – Despite the site covering a former power station and associated service roads, a range of biodiversity surveys took place over a period of six months. These included at least eight in person surveys, and a further 20 automated surveys, for bats and nesting birds. 

Part of the problem is the seasonal nature of animal life cycles, meaning that surveys must be taken at different points in the year to assess whether different species are engaged in different activities. Unlike the EIA process, there is no way for a development to be screened out of a Habitats Regulations assessment: these assessments are necessary for every development. 

New Biodiversity Net Gain rules mean even more paperwork for development

Schedule 14 of the Environment Act 2021^[97] introduced the concept of ‘Biodiversity Net Gain’ to English planning law. As a result, it is legally required that every significant development in England must increase the biodiversity of the site on which it is taking place. This is achieved by increasing the ‘biodiversity value’ of the suite by at least 10%,^[98] which is to be measured with reference to a biodiversity ‘metric’ also set out in the same law.

Government guidance^[99] shows that determining the “biodiversity metric” of a particular site is expensive and time consuming, requiring detailed survey work to catalogue all of the wildlife and habitats in the site. For instance, guidance states that developers should, among other actions,  for each habitat on the site:

• Undertake professional surveys to determine the distinctiveness, type and condition of each habitat
• Record the area and length of each hedgerow, tree, watercourse and patches of grassland and woodland
• Assess each individual “habitat parcel” for “strategic significance”
• Record the diameter of each individual tree in the development area (with limited exceptions)

Industry participants have told us that the rules around Biodiversity Net Gain force developers to recreate surveys and assessments that would be required under the Habitat Regulations, or Environmental Impact Assessments (even for sites that have been screened out of needing an EIA).

Moreover, section 102 of the Environment Act 2021^[100] also amends pre-existing legislation to impose a generalised, undefined duty on all public authorities to “consider what action the authority can properly take… to further the general biodiversity objective”, which is itself defined as “the conservation and enhancement of biodiversity in England”.

Recommendation 3: Radically streamline or remove the environmental and habitat regulations which apply to development in industrial zones

As has been established above, the legal framework requiring onerous, unpredictable and time-consuming environmental and wildlife assessments needs to be changed, so that it is no longer an obstacle to development. As such, the Government should ensure that, for developments in industrial zones:

• The Environmental Impact Assessment regime is wholly replaced with a strict, exhaustive list of factors that need to be assessed as a condition of securing permission for development. This would be far more limited than the enormous list of considerations in the current EIA process, and could be limited to factors such as the impact of the development on air pollution, listed or otherwise protected heritage assets, and the light and noise impact on immediately adjoining properties.

• The elements of the Habitats Regulations 2017 and Wildlife and Countryside Act 1981 which provide general protection to animal species (including Section 1 and Schedule 5 of the 1981 Act and Schedule 2 of the Habitats Regulations) should be disapplied from development in industrial zones. Development would only be required to do specific ecological impact assessments if it were taking place near a protected site, rather than being required to assess the impact on wildlife through numerous and time consuming surveys prior to development.

• Biodiversity Net Gain (via Schedule 14 of the Environment Act 2021) should be disapplied for developments in industrial sites. To prevent local authorities from being under a legal duty to recreate Biodiversity Net Gain under the general biodiversity objective, this should also be disapplied for public authorities in decision-making related to sites in industrial zones.

Why existing powers won’t work

Although the Levelling Up Act 2023 creates the power for ministers to replace^[104] certain environmental and habitat requirements – including the Environmental Impact Assessment and Habitats Regulations regimes – with Environmental Outcomes Reports^[105] (EOR) with specific outcomes set by ministers, these are limited in their use.

This is for two reasons. The first and most critical is the “non-regression” clause in section 156, which requires that ministers are satisfied that:

“…making the regulations will not result in environmental law providing an overall level of environmental protection that is less than that provided by environmental law at the time this Act is passed.”^[106]

The precise meaning of this phrase is undefined in the legislation, and would likely require lengthy litigation and a court judgment to assess whether a particular EOR was lawfully made, limiting the timeframes over which the EOR mechanism could be used. Moreover, the fact that the legislative test is whether the “overall level of environmental protection is less” than the level provided by law in 2023 raises the prospect that this clause represents an absolute barrier to making trade-offs between environmental protection and economically vital infrastructure.

This provision stems from the Trade and Cooperation Agreement between the UK and EU, which commits that:

“A Party shall not weaken or reduce, in a manner affecting trade or investment between the Parties, its environmental levels of protection or its climate level of protection below the levels that are in place at the end of the transition period.” ^[107]

However, as seen above in the Building Chips in America Act and the Building Canada Act, the trade-off between environmental protection and industrialisation is often real, and one that policymakers should be entitled to make and be held accountable for.

The second constraint is that the list of environmental regulations that EORs may disapply^[108] is incomplete. While the list does cover the EIA regulations for local and infrastructure development, it doesn’t cover key pieces of legislation such as the Wildlife and Countryside Act 1981, which makes it an offence to injure any wild bird without a license. As such, it cannot remove the requirement for bird or bat surveys prior to development.

Subsequently, there are not sufficient powers under existing law to relax the national environmental and habitat rules that consume months of developers time and huge amounts of their resources. New primary legislation would be needed instead.

Recommendation 4: Limit possible judicial review of decisions for applications in these sites

While the poor design of the UK’s environmental and habitats rules is a major barrier to development, the mechanism through which that poor design is expressed is often judicial review.

Evidence clearly shows that the fear of losing a judicial review is the driving force behind why developers compile reams of paperwork. Even where permission is granted, consents can – and are frequently over-turned due to what are determined by courts to be procedural errors in filling out paperwork. In the words of a review of the EIA regulations by what is now MHCLG:

“Fear of legal challenge is the predominant force driving assessment practice at all levels. Fear of legal challenge was suggested as the reason for the voluminous, cumbersome and overly-technical reports – these being an attempt not to omit any matter that could be the subject of challenge at a later date. This risk averse approach is likely to be contributing to the high costs and administrative burden associated with EIAs in the town and country planning system.”^[109]

The right to challenge planning decisions on environmental grounds is protected under the UK’s international legal obligations, including the Aarhus Convention, which requires that the UK “shall guarantee… access to justice in environmental matters”^[110] and “ensure that any person who considers that [the environmental review process]… has been… inadequately answered or otherwise not properly dealt with… has access to a review procedure before a court of law”.

The UK’s mechanism of adherence to the Aarhus convention increases the scope of judicial review considerably. One way is through cost awards that may be made against losing litigants in environmental review cases. These are set at £5,000 for individuals, and £10,000 in all other cases.^[111] 

An independent review of judicial reviews in planning decisions recently concluded that “There is little doubt that the cost caps available for judicial reviews within the scope of the Aarhus Convention… have contributed towards the proliferation of challenges to.. planning decisions”^[112]

Who gets to ask for judicial review?

Another question is the issue of standing, or eligibility for bringing a judicial review in the first place. Many environmental judicial reviews are brought by groups that are opposed to the development in principle, yet often bring challenges on procedural, rather than substantive, grounds. In the words of Lord Banner KC: “often challenges to the planning decisions and merits have been dressed up as rationality challenges”. The Government is reported to be considering “raising the bar for those bringing a judicial review to show they have the right to bring a review”^[113].

To increase legal certainty, remove a key driver of onerous paperwork requirements and speed up decision-making, the Government should limit judicial review for developments in industrial zones in the following ways:

• The Aarhus cost caps should be removed entirely, meaning that litigants should be liable for wasted costs in the event of an unsuccessful judicial review on environmental grounds.
• The bar for standing for judicial reviews in industrial zones should be significantly raised. As preconditions for making an application for judicial review, applicants should be required to demonstrate that they:
  • Have participated substantially in the planning process prior to their application for judicial review;
  • Are sincerely interested (either as individuals or as an organisation) interested in procedural propriety,
  • Have not engaged in activity indicating an opposition to the development in principle (such as campaigning or fundraising on those grounds, or organising with groups that are opposed to the development in principle).

Recommendation 5: Increase the speed of development in Industrial Zones by expanding construction time through limiting noise complaints and expanding construction hours

During preparation of this paper, developers frequently raised the risk of noise complaints as a brake on the speed of development. Noise complaints are a result of the Environmental Protection Act 1990^[116], which requires local authorities to issue abatement notices for “statutory nuisances”, which includes “noise emitted from premises so as to be… a nuisance”.^[117]

As a result, councils frequently limit the hours within which construction may be carried out, slowing development. For instance, London boroughs often restrict construction to 8am to 6pm^[118], less than the 7.30am to 8pm permitted in Vancouver^[119]. The difference between a ten and a twelve and a half  hour working day is a 25% difference in the rate of construction.

The Environmental Protection Act 1990 should be amended so that noise emanating from construction in industrial zones is not considered a statutory nuisance under the Act. Moreover, local authority discretion under the Control of Pollution Act 1974, which grants a general power to set construction hours^[120], should be passed to local mayors, and guidance set on less restriction construction in these areas.

Recommendation 6: Reform and removal of statutory consultees such as Natural England and the Environment Agency

There are further barriers to planning approval arising from the range of consultees required by statute. In addition to rules around environmental or habitat protection, local authorities considering planning applications in England are also required by law to consult particular government bodies, depending on the characteristics of the proposed development. For a laboratory or manufacturing development, this can include (among others) the Environment Agency, Historic England^[121] and, since 2023, Active Travel England.^[122]

The list of statutory consultees is set by ministers, exercising powers under the Town and Country Planning Act 1990.^[123]

In practice, this often results in significant pre- and post-application processes handled by developers, to ensure that potential concerns of statutory consultees are met and don’t derail the planning process. Even where developments meet the requirements of local rules or policies, consultation with statutory consultees can and often does cause months of delays and add hundreds of thousands of pounds to a project’s cost. Conversations with developers have raised numerous examples of various government bodies delaying development by months with minor complaints or protracted negotiations about small details, such as the placement of a bicycle shed. For instance:

• The Ellison Institute of Transformative Medicine, Oxford: In December 2022, the Ellison Institute submitted a planning application for redevelopment of their Littlemore House site. In April 2023, the Environment Agency submitted a consultation response, recommending that the permission be refused on the grounds of the impact on a small patch of freshwater in one corner of the development^[124]. After four months of correspondence, the developers decided to resubmit their entire application, except with the relevant area removed from the proposal in September 2023^[125], ten months after the initial application was submitted. In the applicant’s words: “The applicant continues to try and resolve [the Environment Agency’s] concerns, but in order to mitigate against any further unnecessary delays and to allow a meaningful start on site, the applicant has decided to submit this standalone application”.

The delays caused by statutory bodies needing to issue consents are being reformed in other jurisdictions. The best example is the Building Canada Act.

To resolve this the Government should sharply reduce the role of statutory consultees in planning decisions in industrial zones in the following ways:

• The list of statutory consultees in industrial zones should be sharply reduced and limited in scope. This should include:
  • Removing Active Travel England and Natural England as statutory consultees for these sites.     
  • Objections from the Environment Agency should be limited to damage to specific, protected sites, rather than habitat loss in general.
• Statutory timescales for consultation responses should be strengthened, and if a consultee does not respond within the timeframe, then their consent should be assumed.

4. Supplying Energy to Industrial Zones

The problem to the UK economy of high industrial energy prices is well-known. In 2023, the UK had the highest industrial energy prices of any country that was a member of the International Energy Association.

Figure 5: Industrial Energy Prices in the UK and other International Energy Association countries (2023 prices incl. taxes in pence/kWh)

Source: ONS^[130]

These high prices have been a catastrophe for the UK’s industry. In the past four years alone, energy-intensive industries such as metal casting and chemicals have contracted by more than 30%. Recent surveys show that more than 60% of UK businesses say that high and unstable energy prices are damaging their competitiveness.^[131]

Fig. 6: Shrinkage in energy-intensive UK industries since 2021 (Q1 2021 = 100)

Source: ONS^[132]

However, these extraordinary prices are a deliberate policy choice – some 61% of the price faced for energy by industrial users is a combination of tax, policy levies and network and operating costs.^[133] For sectors such as steel, the UK’s total amount of additional levies placed on industrial energy bills is almost the entire difference between UK energy prices and that in other countries.

Figure 7: Energy price for steel industries in UK, Germany and France  2023/4

Source: UK Steel^[134]

These costs are astronomical. The Renewables Obligation and Feed in Tariff – legacy government energy schemes that both charged suppliers for not using renewable sources and guaranteed above-market prices for renewables – added £4.9bn alone to the bills of non-domestic energy users in 2024/5.^[135] Network costs, funding grid maintenance and upgrades, are expected to add more than £9bn to bills just in 2025/6.^[136]

Removing these costs from industrial energy users under the current grid system is complex, because many of these costs are applied to suppliers, who then pass it on to those purchasing energy. As a result, previous Government discount schemes have often relied on exempting some users from costs by raising prices on others. For instance, the Network Charging Compensation scheme – which partially reimburses energy-intensive industries in the UK – is funded by the EII Support Levy, which is charged on other energy users.^[137]

The high cost of energy is a particular concern for industries in emerging technology sectors. Demand for energy from data centres alone is projected to increase by up to seven times by 2050, ^[138] and could amount to more than ten percent of the UK’s entire industrial energy demands.^[139] High energy costs for data centres will be passed directly onto their customers, which will include the UK’s most promising AI and technology firms.

The solution is for smaller, industrial energy generation networks that make far greater use of energy drawn not from the national grid, but instead delivered directly to industrial users. Energy from these networks would therefore be largely exempted from both the policy costs driven by legacy renewables schemes, and from the network costs associated with being required to fund national energy infrastructure.

Recommendation 7: Support energy generation co-located with industry in industrial zones, with private networks supplying energy without grid or policy costs.

To ensure access to power, developments in industrial zones should be able to be connected to nearby energy generation via off grid, private connections, as well as the national grid. As these would be private connections, energy users would largely not be required to pay the policy or network costs associated with connecting energy via the grid (although some limited network levy would be necessary to pay for the cost of a national grid connection as a contingency – see Recommendation 8 below). This could reduce the cost of energy for users in industrial zones by approximately 40%.

These energy generators would be connected to the national grid, as well as to developments in industrial zones. To make sure that energy generators are incentivised to supply to these sites, rather than the grid, users should be required to pay a small levy (for instance, 10%) on top of the wholesale price.

Implementing this system – where both energy suppliers and users would have private connections in addition to flexible grid connections – would require changes to Ofgem’s regulatory practices. It would also require the construction of new, private substations that connect to the UK’s transmission network. This would require a change to or carve-out from section 4(1) of the Electricity Act 1989,^[140] as currently the National Grid is the only licensed operator and developer of substations that connect to the UK’s transmission network.

This mechanism should be agnostic as to the source of energy used. The speed of deployment, and consistency of supply, needed for industrial users, means that gas is among the most suitable sources of energy. However, the deployment of renewables under this mechanism should not be prevented. Where industrial energy users are guaranteed stable, lower energy prices, they have demonstrated significant willingness to invest in energy generation assets. As a result, this would further increase investment activity in and around industrial zones.

However, developments in industrial zones as well as the generators supplying them, would still require connections to the national grid. This means that reform to the UK’s grid connection system, which is riddled with delays and inefficiencies, is also required.

Recommendation 8: Ministers should prioritise demand side grid connections in industrial zones using powers in the Planning and Infrastructure Bill

During the interviews held for this paper, businesses explained that they had been told by power companies that they would have to wait more than a decade for grid connections. This has been acknowledged by the ministers^[143], and reducing this queue was the major motivation behind the decision to reform the grid connection queue process from “first come, first served” to “first ready, first connected”.^[144]

In this new grid prioritisation procedure, projects would pass through two “gates” before being connected to the national grid.

• Gate 1 will be an annual window in which projects can apply to enter the connection queue based on the project’s “readiness”.^[145]
• Gate 2 will determine the final prioritisation for grid connections, on the basis of criteria such as alignment with strategic plans and government policy documents.^[146]

As part of these reforms, the Government is taking powers in the Planning and Infrastructure Bill (currently before Parliament) for ministers to set what kinds of projects should be prioritised for a grid connection in Gate 2.^[147]  While the Government has said that it will use this power to prioritise connections on the supply-side for renewables,^[148] it has not yet said how it will prioritise demand-side connections.

To ensure that developments in industrial zones have timely access to the grid, and that this is not a barrier to investment, the Government should use the powers in the Planning and Infrastructure Bill to prioritise such developments. In practice, this would mean that any developments located in industrial zones that have passed Gate 1 would be prioritised at Gate 2. As described above, the primary source of energy for developments in industrial zones would be co-located private generators. However, they would not be exempt from the full policy and network levies when drawing energy from the national grid.

Conclusion

Supporting the revitalisation of industry in the UK is vital for economic growth and for ensuring that there is opportunity in every corner of the country. As this paper has shown, this will require reform to the key supply-side constraints on industrial expansion: the rules and regulations governing the ability to build, and boosting the supply of cheap, plentiful energy.

The prize is significant. The UK’s world-leading R&D could be translated into jobs at British companies, located in a new generation of industrial clusters around the country. New centres of innovation and growth could be developed all across the country. Businesses wouldn’t have to look over their shoulders, wondering if American or European competitors will get ahead because they have more space, faster build times and lower costs.

The reforms outlined above would go some way to undoing the historic failures of British Governments, who have over decades repeatedly loaded costs on businesses and prevented investment. The question for policymakers is whether they will be brave enough to do so.

^[i] Report (page 193) – Royal Commission on the Distribution of the Industrial Population, January 1940 (link)

^[1] Small Business Equity Tracker 2024 – British Business Bank July 2024 (link)

^[2] State of UK Deep Tech 2024 – Royal Academy of Engineering (link)

^[3] This figure was reached from the UK being 26m sqft behind the US in laboratory space that is completed and under construction, and 10.7GW behind in data centre stock and under construction. [Sources: UK labs under construction of 5.6m sqft- CBRE April 2025 (link); US labs under construction of 16.6m sqft – CBRE February 2025 (link); UK laboratory inventory of ~8m sqft CBRE April 2025 (link) US laboratory inventory of 181.7m sqft – CBRE April 2023 (link); taking an average cost/sqft of £443 – Gardiner (link), giving £11.5bn in missing lab space stock and pipeline.
UK data centre capacity of 1.6GW in 2024 – DSIT May 2025 (link); US data centre capacity of 20GW in H2 2024  and under construction or planned pipeline of 52.4GW – Cushman Wakefield 2024 (link); UK data centre under construction and planned pipeline of 2.2GW – Cushman and Wakefield 2025 (link), with cost of ~£10m/MW, giving £107bn in total missing stock and pipeline]

^[4] Regional and subregional labour productivity, UK: 2023 – ONS, June 2025 (link)

^[5] Birmingham History and Heritage – Visit Birmingham (link)

^[6] The world’s first industrial city – Science and Industry Museum (link)

^[7] Venture Capital in the UK Report 2025 – BVCA (link)

^[8] Climbing the Summit: Big Cities in the UK and the G7 – Centre for Cities 12 June 2024 (link)

^[9] The UK’s Modern Industrial Strategy – HMG, June 2025 (link)

^[10] Huge boost for UK industry as Government powers ahead with cuts to electricity costs – DBT, July 2025 (link)

^[11] Planning and Infrastructure Bill (link)

^[12] A review of environmental assessment regimes in England – Office for Environmental Protection, October 2023 (link)

^[13] Importance of Advanced Planning of Manufacturing for Nuclear Industry – Shykinov et al, 2016 (link)

^[14] The shortage of lab space in the UK’s “Golden Triangle” – Knight Frank, 7 August 2023 (link)

^[15] Power and planning constraints threaten UK data centre growth – Data Centre Review, 10 January 2025 (link)

^[16] Long-term shortage of logistics space could restrict economic growth – Savills, 23 February 2022 (link)

^[17] The Housebuilding Crisis: The UK’s 4 million missing homes – Centre for Cities, 22 February, 2023 (link)

^[18] Percentage of overall turnout for local elections in England – LGA (data recovered 30 July 2025, link)

^[19] Population estimates by output areas – ONS, 25 October 2018 (link)

^[20] HS2 was doomed to be a mess, say insiders – because of a ‘problem in this country’ – BBC, 21 July 2025 (link)

^[21] Report (page 1) – Royal Commission on the Distribution of the Industrial Population, January 1940 (link)

^[22] Ibid (Paragraph 418, page 197)

^[23] Town and Country Planning Bill (Second Reading Debate) – Hansard, 29 January 1947 (link)

^[24] Section 14(4) – Town and Country Planning Act 1947 (link)

^[25] Town and Country Planning Bill (Second Reading Debate) – Hansard, 29 January 1947 (link)

^[26]Schedule 1 – Distribution of Industry Act, 1945 (link)

^[27] Local Employment Act (Development Districts) – Hansard, 31 March 1960

^[28] Section 16(1) – Local Employment Act 1960 (link)

^[29] Industrial Development Certificates – Hansard, 27 July, 1961 (link)

^[30] Industrial Development Certificates – Hansard, 1 December 1965 (link)

^[31] Town and Country Planning (Industrial Development Certificates) (Prescribed Classes of Building) Regulations 1981 (link)

^[32] West Midlands – Hansard, 4 December 1981 (link)

^[33] The impact of Government policies on UK manufacturing since 1945 (page 36) – Broadberry and Leunig, Government Office for Science, October 2013 (link)

^[34] Wettmann, R.W. and Nicol, W.R. (1981), Deglomeration Policies in the European Community

^[35] Permitted development rights (covering garden extensions, EV chargers and use conversions) prevent councils from blocking them. Greybelt classification forces councils to permit development they would otherwise deny. Changes to the NPPF to facilitate upward expansion require councils to agree to development they would otherwise refuse. Timetables for local plans force councils to issue development plans they otherwise would not prepare. The list goes on.

^[36] Section 149 – Local Government, Planning and Land Act 1980 (link)

^[37] Park Bureau – Hsinchu Science Park (link)

^[38] Statistics – Hsinchu Science Park (link)

^[39] Behind the economic success of Taiwan’s Hsinchu Science Industrial Park – You-Lin Tsai, April 2015 (link)

^[40] Reassessment of the State Role in the Development of High-Tech Industry: A Case Study of Taiwan’s Hsinchu Science Park – So, East Asia, Summer 2006

^[41] Cluster policies and industry development in the Hsinchu Science Park: A retrospective review after 30 years – Ching-Pu Chen et al, Innovation 2013

^[42] See ref. 49

^[43] Section 134 -Local Government, Planning and Land Act 1980 (link)

^[44] Local Government, Planning and Land (No. 2) Bill – Hansard, 5 February 1980 (link)

^[45] The London Docklands Development Corporation (Area and Constitution) Order 1980 (link)

^[46] Reg Ward obituary – Guardian, 22 February 2011 (link)

^[47] Urban Redevelopment of the London Docklands – Architecture Competitions (link)

^[48] Merseyside Development Corporation (Area And Constitution) Order 1980 – Hansard, 24 March 1981 (link)

^[49] Ibid.

^[50] History – Albert Docks (link)

^[51] Page 11, The operation and wind up of Teesside Development Corporation – National Audit Office, 27 February 2002 (link)

^[52] Written evidence from MIlton Keynes City Council  – House of Lords Build Environment New Towns Inquiry, 8 July 2025 (link)

^[53] Ibid.

^[54] Schedule 12, section 1(4)(c) – English Devolution and Community Empowerment Bill (link)

^[55] Our History – JTC (link)

^[56] Section 12(4) – Jurong Town Corporation Act 1968 (link)

^[57] Speech by JTC Chairman – JTC, 25 May 2018 (link)

^[58] High-rise industrial facilities, agri-tech park feature in revamped Sungei Kadut industrial estate – Straits Times, 6 February 2020 (link)

^[59]Jurong Innovation District – JTC (link)

^[60] Annual Report 2023 – July 2024, JTC (link)

^[61] Section 33 – Planning and Compulsory Purchase Act 2004 (link)

^[62] Town and Country Planning (Use Classes) Order 1987 (link)

^[63] Section 93(2) – Levelling Up and Regeneration Act 2023 (link)

^[64] Section 63(3)(a) – Town and Country Planning Act 1990 (link)

^[65] Planning ref. P19/S2198/FUL, South Oxfordshire District Council (recovered 26/08/25)

^[66] Planning ref. DC/090411, Stockport Metropolitan District Council (recovered 26/08/25)

^[67] Section of major I-95 highway in Philadelphia that collapsed after tanker truck caught fire underneath could take months to repair, officials say – CNN, June 2023 (link)

^[68] Proclamation of Disaster Emergency – Governor of Pennsylvania, June 2023 (link)

^[69] Update on I-95 Collapse – Governor of Pennsylvania, June 2023 (link)

^[70] Governor Shapiro Gets Stuff Done: Reopening I-95 in just 12 days – Governor of Pennsylvania, December 2023 (link)

^[71] Section 93(2) – Levelling Up and Regeneration Act 2023 (link)

^[72] Section 94(1) – Ibid. 

^[73] Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (link)

^[74] Post Implementation Review: Town and Country Planning (Environmental Impact Assessment) Regulations 2017 – DLUHC 2023 (link)

^[75] Post Implementation Review: Infrastructure Planning (Environmental Impact Assessment) Regulations 2017 – DLUHC 2023 (link)

^[76] Planning ref. PA/21/02707/A1, LB Tower Hamlets (recovered 15/09/25)

^[77] Planning ref. 23/01697/OUT, LB Newham (recovered 15/09/2025)

^[78] Paragraph 62, R (on the application of Finch) v Surrey County Council – UKSC 2024 (link)

^[79] Recital 16 – Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment (link)

^[80] Paragraph 21, R (on the application of Finch) v Surrey County Council – UKSC 2024 (link)

^[81] Regulation 5, Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (link)

^[82] R (on the application of Finch) v Surrey County Council – UKSC 2024 (link)

^[83] NSIP – Advice Note Nine: Rochdale Envelope – Planning Inspectorate, MHCLG (link)

^[84] Ibid.

^[85] Paragraph 152, R (on the application of Finch) v Surrey County Council – UKSC 2024 (link)

^[86] The Conservation of Habitats and Species Regulations 2017 (link)

^[87] Wildlife and Countryside Act 1981 (link)

^[88] Bats: Advice for making planning decisions – Natural England, April 2025 (link)

^[89] Why does it cost £100m for HS2 to protect bats? – BBC, November 2024 (link)

^[90] Section 1(a) – Wildlife and Countryside Act 1981 (link)

^[91] Schedule 2 – Conservation of Habitats Regulations 2017 (link)

^[92] Schedule 5 – Wildlife and Countryside Act 1981 (link)

^[93] Ibid.

^[94] Planning ref. 23/02092/FUL, Oxford City Council (recovered 11/08/25)

^[95] Planning ref. 139778/FO/2024, Manchester City Council (recovered 18/08/2025)

^[96] Planning ref. 21/09982/FU, Leeds City Council (recovered 17/08/25)

^[97] Schedule 14 – Environment Act 2021 (link)

^[98] Section 2(2)(3) – Ibid.

^[99] The Statutory Biodiversity Metric User Guide  – DEFRA, July 2025 (link)

^[100] Section 102 – Environment Act 2021 (link)

^[101] What’s in the new Building Chips in America Act and what does it mean for the semiconductor industry? – World Economic Forum, October 2024 (link)

^[102] Building Chips in America Act – Senator Mark Kelly, July 2023 (link)

^[103] Fact Sheet: CEQ Report on Environmental Impact Statement Timelines (2010 – 2018) – Executive Office of the President & Council on Environmental Quality, June 2020 (link)

^[104] Section 164 – Levelling Up Act 2023 (link)

^[105] Section 152 – Ibid. (link)

^[106] Section 156 – Ibid. (link)

^[107] Article 391(2) – UK/EU Trade and Cooperation Agreement (link)

^[108] Schedule 14 – Levelling Up Act 2023 (link)

^[109] Post Implementation Review: Town and Country Planning (Environmental Impact Assessment) Regulations 2017 – DLUHC, March 2023 (link)

^[110] Article 1 – Aarhus Convention (link)

^[111] Rule 46.26 – Civil Procedure Rules (link)

^[112] Independent Review into legal challenges against Nationally Significant Infrastructure Projects – MHCLG, October 2024 (link)

^[113] Rachel Reeves orders fresh planning overhaul for ‘critical’ infrastructure projects – FT August 2025 (link)

^[114] Proclamation of Disaster Emergency – Governor of Pennsylvania, June 2023 (link)

^[115] Can I-95 repairs teach us to build faster – Institute for Progress, July 2023 (link)

^[116] Part III – Environmental Protection Act 1990 (link)

^[117] Section 79(1)(g) – Ibid.

^[118] Noise from building works – London Borough of Greenwich (link)

^[119] Noise control By-law 6555 – City of Vancouver (link)

^[120] Section 60(3) – Control of Pollution Act 1974 (link)

^[121] Schedule 4 – Town and Country Planning (Development Management Procedure) (England) Order 2015 (link)

^[122] Active Travel England to be consulted on all large planning applications – Active Travel England 1 June 2023 (link)

^[123] Within TCPA, these powers include section 59, which is the general Development Order power (link) and section 74, which creates a power to set a method of dealing with applications (link)

^[124] EA correspondence, Planning ref. 22/02969/FUL, Oxford City Council (recovered 11/08/25)

^[125] Covering Letter,  Planning ref. 23/02092/FUL, Oxford City Council (recovered 11/08/25)

^[126] Building Canada Act – Projects of national interest – Government of Canada (link)

^[127] How the new Building Canada Act works – Norton Rose Fulbright, 30 June 2025 (link)

^[128] Section 6(1) – Building Canada Act 2025 (link)

^[129] Accelerated project approvals under the Building Canada Act – Cassels, 10 June 2025 (link)

^[130] Fig. 3, The impact of higher energy costs on UK businesses: 2021 – 2024 – ONS 19 May 2025 (link)

^[131] Three in five UK businesses concerned volatile energy costs are undermining growth plans – EY, May 2025 (link)

^[132] See ref. 139

^[133] Why are UK industrial electricity prices so high – and what can be done about it? – Sky News 19 June 2025 (link)

^[134] Industrial Competitiveness: Energy Prices Faced By UK Steelmakers – UK Steel, November 2023 (link)

^[135] Reducing non-domestic electricity prices to drive economic growth – EnergyUK, April 2025 (link)

^[136] Transmission Network Use of System in 10 minutes – NESO, July 2025 (link)

^[137] Energy Security Bill factsheet – DESNZ, September 2023 (link)

^[138] Figure 1, Data Centres – National Grid ESO, March 2022 (link)

^[139] Future Energy Scenarios: Pathways to Net Zero – NESO, July 2025 (link) [Using fig. 5, showing total UK industrial and commercial energy demands of ~300TWh in 2050]

^[140] Section 4(1) – Electricity Act 1989

^[141] Microsoft deal propels Three Mile Island restart, with key permits still needed – Reuters September 21 (link)

^[142] Why Microsoft made a deal to help restart Three Mile Island – MIT Technology Review September 2024 (link)

^[143] Clean energy projects prioritised for grid connections – DESNZ, Ofgem 15 April 2025 (link)

^[144] “First Ready, First Connected”: Reform to GB Electricity Grid Connections – Norton Rose Fullbright March 2025 (link)

^[145] Summary Decision Document: TM04 connections reforms proposals – Ofgem, April 2025 (link)

^[146] Decision: Gate 2 Criteria Methodology – Ofgem, April 2025 (link)

^[147] Section 17(1) – Planning and Infrastructure Bill (link)

^[148] See ref. 152

^[i] Nvidia chief says UK lacks digital infrastructure as Keir Starmer pledges £1bn for AI – FT 9 June 2025 (link)

^[ii] Q.529, Oral Evidence: Industrial Strategy – Business and Trade Select Committee April 2025 (link)

^[iii] Fig. 3, Fifty years of the preliminary estimate of UK GDP – ONS 18 August, 2022 (link)

^[iv] Ibid.

^[v] Venture Capital in the UK 2024 – BVCA November 2024 (link)

^[vi] Small Business Equity Tracker 2024 – British Business Bank July 2024 (link)

^[vii] Ibid.

^[viii] Artificial Intelligence – Business.gov.uk (link)

The post Reindustrialising Britain appeared first on Onward.

The British economy is stuck.  We have to face facts: this is no longer a blip, no longer a temporary aberration, but a generational trend.  

Real GDP per capita is still lower than in 2019, and almost no higher than in 2008. Average wages are no higher. British workers make nearly a third less than their American counterparts, while France is nearly 20% more productive than we are. We consume a lot, but invest and save little. Meanwhile, unprecedented and wholly unsustainable levels of immigration have generated an illusion of growth while doing nothing for living standards – except piling pressure on housing and public services while compressing wages for the lower paid.

We are held back by a stifling web of planning rules, bureaucratic regulations, taxes and self-imposed energy poverty – as many others have correctly argued. Rail projects take 50% longer here than in similar countries. HS2 became one of the most expensive railways in the world. We have a shortage of some four million homes through failure to build. We need radical supply-side reform to let markets do their work.

But this is not enough. The global economy is going through huge tumult. Punitive and arbitrary tariffs are not the answer. But the pace and manner of ultra-globalisation had become unsustainable, with Western economies naively accepting Chinese distortions and aggressive mercantilism. In this new era of competition for energy, chips, manufacturing capacity, minerals and new technologies, we must act robustly in the national interest to make Britain both more prosperous and more secure. This will involve deploying our nation’s pools of capital much more productively so great companies can grow, and building resilience into our supply chains.

Britain’s share of global trade is falling and we are offshoring industries at breakneck speed. Our country’s prosperity was built not on colonial exploitation, but on being the workshop of the world. Today, we neither make nor do enough of what the world wants and needs to buy. And just as we should be acting to reverse this deindustrialisation, Labour are hitching us to the EU’s burdensome carbon pricing system. Our industrial energy prices are already some of the highest in the world. This is madness – instead, we should seek to reindustrialise.

We must also make Britain fairer. We remain one of the most geographically unequal countries in the developed world, transferring more than £60 billion annually to keep regions beyond London and the South East afloat. And the social contract between generations is broken, with more young people choosing to leave for lack of opportunity, crushed by crippling taxes and house prices. For capitalism to survive, people must have capital. Making Britain fairer is not a luxury – we cannot fix either growth or the size of the state without extending prosperity more widely. 

Britain can and must do better. We have the best universities, the best innovation and R&D, and some of the best tech start-ups in the world. We are world-leading in AI, quantum computing and life sciences, and in hard industries from aerospace to chemicals. We have the Golden Triangle and an amazing pool of talent and skills. Yet too many industries are under unsustainable pressure, and companies with huge potential are struggling to grow. Decline is a real threat – but it is a choice. Changing direction will be hard, but necessary. We must re-engineer the UK into a high-growth, high-wage, low-migration, productive economy. We owe it to future generations to act now.

Onward’s new research programme, Rebuilding our Economy, will lead the way in diagnosing these challenges and providing radical solutions. This paper lays out the direction our research will take, and the issues we will tackle. Through our work we hope to provide the ideas needed to make Britain prosperous once again.

Rt Hon Sir Simon Clarke

Director, Onward

Introduction

Britain is stuck in a low-growth equilibrium. Incomes have not risen since 2008 but inequality has. The population is ageing and the country is facing a precipitous drop in industrial capacity in a less secure world. But Britain’s underlying potential is strong – decline is a choice.

Welcome to the growth crisis

There is no dispute that Britain is stuck in a growth crisis. Over the last ten years overall GDP growth has averaged just 1.44%,¹ while the population has grown by between 4 and 5%.² This matters because a fundamental principle of a market-driven economy is that consistent growth generates a gradual rise in overall living standards, reducing the political and moral pressure for wholesale redistribution. Growth provides the tax yields that fund our public services, the cost of which is only set to rise as our society ages. Just to fund current spending commitments without raising taxes, the Office for Budget Responsibility calculates annual GDP growth would need to be closer to 3%.³ And growth is the only way to maintain living standards in the face of inflation. 

For too long policymakers have focused only on GDP and not on GDP per capita. Real net GDP per head in June 2024 was only £1,072 higher in today’s prices than it was in 2007,⁴ the pre financial crisis peak. And it remains lower than in 2019, before the Covid pandemic struck. Real wages have barely moved since 2008, and were falling during the bout of inflation the UK experienced in the wake of global lockdowns ending and the war in Ukraine. American workers earn around 40% more than their UK counterparts as US growth rates have accelerated.⁵ Underlying this is the UK’s flatlining productivity growth,⁶ which has historically lagged behind the US, Japan, Germany, Canada and France.⁷ This is a story of lost opportunity.

Figure 1: Real average weekly earnings, pre-2008 trend and outturn, 2000-2024

Source: ONS⁸

Without stronger growth, no other political goals can be achieved. But Britain suffers from other economic woes too. Its income inequality is relatively low, though this is due in part to its “bunched” income spectrum. However, it is suffering from increasing wealth inequality, with the opportunity to acquire capital – particularly a house – increasingly cut off.

A part of the story that is unique to the UK is the scale of regional inequality – it remains one of the most geographically unequal in the developed world.⁹ operating a large transfer union to the regions beyond London and the South East. And without London, living standards would be 14% lower, leaving Britain as poor as the US state of Mississippi.¹⁰

Less growth, less security 

At the same time the country has undergone a profound loss of economic security. A loss of security in the sense of being increasingly beholden to soaring global wholesale gas prices given its status as a significant net importer of energy. But also a loss of personal economic security, caused in part by unfair competition from global low-wage migration, and in part by the rise in forms of unstable work in the gig economy. Putting these factors together, it is becoming increasingly difficult for British households to put down roots, own their own home and start a family. This compounds the demographic crisis the UK faces in the medium term, which will see the share of the population that is retired skyrocket relative to workers – a trend that is sadly set only to continue as the birth rate falls to below 1.5 children per woman, putting enormous pressure on future taxpayers.¹¹

An economy can sustain relatively high inequality with healthy growth, and may survive lower growth with lower inequality, but it cannot sustain both simultaneously. And without faster growth the public’s political demands for better funded public services will simply be fiscally impossible.¹² And the country faces this challenge in the most challenging of global contexts, with enormous disruption to supply chains, turmoil on global capital markets, an unpredictable United States and pressure to spend much more on defence. Britain must treat the growth crisis in effect as a national emergency. And it must rebuild with growth that is sufficiently widely shared, sustainable and built on strong foundations. 

What is to be done? 

Onward’s new research programme, Rebuilding our Economy, will make the case for radical policy changes that will bring about significantly faster growth. It will argue for growth with a more even distribution across the geography of the UK so opportunity can be extended to the whole country and the need for internal regional subsidies reduced. And it will prioritise achieving greater economic security for British households and for the UK as a sovereign nation in a more dangerous world. 

It will embrace root-and-branch supply side reforms to housing, planning, infrastructure and energy, with reforms to tax, incentives and regulations to achieve market-driven growth. But it will also argue for targeted industrial strategy in the UK national interest, aimed at rejuvenating critical industries in the private sector, achieving reindustrialisation and improving Britain’s trade performance. And it will develop a plan for place-based strategy to create new clusters of economic agglomeration outside the South East.

On the one hand the state is too large and too wasteful – ways to reform and reduce it will be the subject of Onward’s Reshaping the State Programme. But its most damaging impact on the economy is not what it spends on public services and social security. It is its effective prohibition of private sector investment through its approach to planning, regulation and energy – its interventions that do not come with a price tag except in lost growth. 

Yet in other ways the state has been idly negligent – of nurturing UK manufacturing, building critical infrastructure, planning to capitalise on scientific and technological innovations and responding to the pressures of international trade. The lack of strategy, far from delivering optimal market outcomes, has ultimately led to a loss of productive capacity, in turn harming both growth and security. A state is needed that is smaller, stronger and more strategic. 

The competing outlooks for the UK economy have been classified by some as “Boosters” and “Doomsters”.¹³While Boosters believe there is wide scope for the British economy to grow from its current baseline, Doomsters take the view that the UK is a mature, developed economy with little room left to grow, with future economic debates largely confined to questions of distribution.

The Doomsters are wrong, and for reasons that are in part alarming. The UK has a significant way to go and must think of itself as a catch-up economy rather than a mature one. It has some of the most valuable financial and professional services in the world, and is a major net exporter of these. Its reduced manufacturing base includes some of the most innovative industries including life sciences, pharmaceuticals, high-end automotive and aerospace and high-value defence manufacturing, with enormous potential to grow in output and value. 

It is home to some of the world’s most cutting-edge innovation, with ready-made agglomeration in the Golden Triangle of Oxford, Cambridge and London, with the commercial potential of the knowledge base to which it is home so far not realised. And the UK has the opportunity to lead the world at the AI regulatory frontier, and is already world-leading in quantum computing.

Britain labours under stultifying supply-side barriers which need not be there, particularly around planning and regulation, has a constrained energy supply arising from more than a decade of poor policy choices, and has allowed value in supply chains to be offshored rather than captured when it could have chosen otherwise. Successive governments have chosen to pursue low-wage, low-skill migration as a pathway to aggregate growth, with consequent stagnating productivity and skills and significant overcrowding in its cities. The unfortunate truth is that Britain’s stagnation is down to political choices- at times, sleepwalked into. 

The good news is that these choices can be reversed. And with the right plan, they will be.

1. Income and living standards

British living standards have stagnated for some 20 years, underperforming other developed economies, while wealth inequality has been rising. This is a lethal combination.

The single biggest story in British living standards is the failure of the economy to grow on a per capita basis by any significant amount since the 2008 financial crisis. It is around one-third, or £10,900, lower than it would have been had the pre-2008 trend continued.¹⁴ And American workers make 40% more than their British counterparts. There have been 17 years with very little improvement to measurable living standards. In contrast, GDP per capita increased from £22,595 per year to £30,308 in the twelve years to 2007.¹⁵

Figure 2: GDP per capita compared to OECD comparators ($US, current prices, PPP adjusted)

Figure 3: GDP per capita, median weekly wage, and output per worker, 1997 – 2023, 1997 – 2023

Figure 4: Real median hourly pay, 1997-2023

Figure 5: Gross value added per hour worked (current prices) and pre-2008 trend, 1997-2023

Figure 6: Real net GDP per capita and pre-2008 trend, 1997-2023

Source: ONS¹⁹

Although income inequality has risen since the 1970s, inequality of income is not atypical for a developed economy. The share of national income going to the top 1% has roughly doubled since the 1970s, and the 90:10 ratio, which measures the ratio of income between the 90th and 10th percentiles, has risen from around 3 to around 4. This is higher than most European countries, but lower than the United States.²⁰However, the share going to the very richest skews the picture. The income gap between the 25th percentile and the median is only around £10,000 per year,²¹ and the gap between the median and the 75th percentile is about the same.²²

Britain has a “bunched” income distribution, with most earning within a standard deviation of the median. Income inequality is reduced in part by increases to the national living wage – though it is unclear how much higher this can rise without affecting employment. And earnings at the lower end of the income distribution are subsidised by in-work benefits in the form of Universal Credit. This is important because it means lower income levels are being boosted through distributive measures rather than growth.

Figure 7: UK income distribution, 2021

The issue the UK faces is that the median, £37,430, is not high.²⁴ In fact, it is below the level needed to be a net fiscal contributor. This means the average UK worker receives more in public service spending and social security than they contribute in tax – a minority subsidises a majority. In the year ending 2023, median equivalised household income was £37,300 but £39,700 after taxes and benefits.²⁵

And while Britain is not especially unequal by income, its wealth inequality has risen, with the bottom 50% of the population owning less than 5% of the wealth and the top 10% owning 57%, up from 52.5% in 1995.²⁶ Differences in housing wealth are a major driver of this, with more than 40% of all UK wealth being held in real estate²⁷.This is not only about current ownership of wealth but about the ability to build wealth. 

2. Tax

The UK’s tax burden is at a post-war high and could exceed 40% of GDP in the next decade (public spending is already higher than this). But personal taxation on income is relatively low for most British households, putting pressure on higher earners. Growth must increase so tax yields rise and punitive rates and thresholds must be reformed.

The low-tax, high-tax economy

The overall tax burden – the share of national income that is taxed and spent by the state – is 35.3% and is forecast to rise to a post-war high of 37.7% of GDP by 2027-8.²⁸This is moderately above the OECD average (currently 34%.²⁹) However, this burden is spread very unevenly. In fact, the direct taxes on income paid by average and below-average earners in Britain are some of the lowest in Europe. Someone earning the median salary will pay less in direct tax on their income than their equivalent in the United States, Canada, Ireland, Australia, Germany or Sweden.

This is because the historically high tax yield is serviced by a diminishing share of the workforce – namely those on higher incomes. This has become the case through sustained fiscal drag, particularly the freezing of the income tax thresholds and especially the higher rate.³⁰

So Britain faces a double challenge: its overall burden is punitively high but the tax base is unsustainably narrow, with too few people paying too much of the tax.

Figure 8: Personal tax deduction rates by income percentile, OECD countries

Conservatives in theory have a good track record here. A little known fact is that the median UK  worker now pays almost £2,000 less in direct taxes each year, adjusting for inflation, than they would have paid on the same income in 2010.³² This is due to Conservative tax policies such as the personal allowance and reductions to employees’ National Insurance Contributions (NICs).³³

How can this be, given the rise in the overall income tax burden? Britain has pursued a progressive approach to personal taxation, with the top tenth of earners – 3.6 million people – paying nearly 60% of all income taxes.³⁴ In a low growth context it may seem fairer to shield middle and lower earners from the rising burden of taxation. But there are limits to how far those eligible to pay the higher rate can be squeezed through fiscal drag – the process by which more people and a greater share of their income are pulled into the higher rate through inflation.

In 2018-19, for example, the higher rate threshold – where a worker starts paying a 40% marginal rate – was £46,350.³⁵It was subsequently raised to £50,000 but then frozen in the 2019-20 tax year.³⁶ If a deflator is applied to £50,000 to 2018-19 prices it would be equivalent to £42,200³⁷ – below the 2018-19 threshold. In today’s prices, the value of the higher rate threshold in 2009-10 was as high as £65,000.³⁸ More earners are therefore being subject to higher rate tax via fiscal drag, and the value of someone’s income taxed only at the basic rate is being continually reduced.

The UK therefore faces a challenge due to the breadth of the tax base being eroded, while the share of the population that is shouldering the burden has been reduced. 

Figure 9: Share of tax burden paid by different income percentiles, 1979 – 2023

Margin calls 

As well as its rising tax burden and smaller tax base, Britain has highly punitive marginal tax rates (MTRs), especially around the income tax thresholds. When combining factors such as student loan repayment deductions, the High-Income Child Benefit Charge (HICBC), the higher rate of income tax and the loss of the personal allowance, marginal rates can exceed 70%.⁴⁰Such rates are profoundly distortive to incentives.

In the Autumn Budget of 2021 Rishi Sunak, then Chancellor, cut the taper rate of Universal Credit – the rate at which the benefit is withdrawn as earnings increase – to 55p in the pound. This was partly in response to the argument that the old rate – 63p – was one of the highest marginal rates in the economy.⁴¹The same principle should apply at both ends of the income spectrum And it should be remembered that while higher rate payers are by definition earning above average incomes, this does not mean that they are particularly rich – UK incomes are “bunched”  and houses are highly expensive.

…And more taxes

There can be a tendency to focus too much on the impact of personal taxes on growth rates – though they undoubtedly affect incentives and people’s ability to save. Equally if not more important are business taxes. Again, there can be a tendency to fixate on corporation tax, though the importance of the headline rate can be overstated as it is charged on profits not incomes. The rate was raised from 19% to 25% under the last Conservative government and so regrettably is now less competitive. That said, it is not atypical within the G7 and remains below Germany’s, Canada’s or Japan’s rate.⁴²

Business rates are a tax that receives less attention. However, they are structured in an extremely distortive and regressive way in the UK. They disproportionately punish bricks-and-mortar businesses, disincentivise expanding to new premises and their relative impact is greater outside the South East – where more economic activity is needed, not less.⁴³ The UK’s infamous VAT threshold for small businesses, which kicks in at £90,000 per year of taxable turnover,⁴⁴ is a major barrier to scaling up. And Stamp Duty, while it may raise more than £15 billion per year,⁴⁵ deters property transactions, encouraging people to make suboptimal housing choices and slowing down velocity in the market.

The UK faces an extremely challenging long-term fiscal outlook given its demographic trajectory. Yet it is unacceptable for the overall burden of tax to continue rising inexorably – eventually the economy will reach its taxable limit. A combination of changes are needed to mitigate and reverse this, including a stronger birth rate, rising labour market participation and a higher rate of growth. But it is not only the overall tax burden that presents a problem. It is also the structure of the tax system and the deterrents to growth and work it creates that must be addressed. 

3. Productivity

Britain’s growth problem is at its core a productivity problem. Its excellent innovation is not being converted into productive output. It has too many low-value industries and unproductive workers. Its profound regional inequality is ultimately also a productivity problem.

The Productivity Puzzle

Britain’s poor growth in GDP per capita and real wages is due not principally to taxes, denial of fair wages by employers or asset hoarding, but weak productivity. This refers to the ability of a worker to create more value with the same inputs of capital and labour (or to create the same with less). It lags the OECD average and other major comparator countries.

Figure 10: International comparison of GDP per hour worked, select OECD countries, 1990-2020

Figure 11: International comparisons of real GDP per hour worked, select OECD countries, 1995-2023

In the United States, productivity and wages have decoupled. This means that employers and owners of capital have been taking a higher share of the proceeds of their workers’ labour (and of their own investments). That has not been the case in Britain, where wage growth, or lack of it, has largely tracked productivity.

If you do not have productivity growth, the only way to increase national income is for people to work longer hours or for more people to join the workforce – whether this is through people moving out of economic inactivity or through inward migration, which brings its own problems (and assumes migrants will be net contributors).

Figure 12: Productivity and median hourly wage, 1997 – 2023

There has been much written on the causes of the UK’s productivity dilemma with no clear consensus on one single cause. However, factors that contribute are low investment in things that will make workers more productive (automation, skills, machinery and other fixed capital investments), a misalignment of skills to jobs, a shortage of inputs – especially energy – and the lack of high-productivity industries.

There has been a significant decline in industries that typically have high productivity growth like manufacturing, and a lack of new industries combining technology with capital in a way that will generate productive output. There is also the question of the UK’s human capital: in addition to our existing skills deficit we have imported a new problem:  a vast wave of low-skill, low-productivity migrant workers, which has adversely affected productivity performance.

The regional productivity gap drives high spending

The large and growing gap in productivity between UK regions is a major driver of divergent real wages and living standards. The differences in quality of life, opportunity and even life expectancy across the UK’s economic geography are sadly well known. What is less appreciated is the impact this has on the UK’s spending requirements. All but two British regions at International Territorial Level (ITL) 1 are net recipients of public money from the Exchequer.⁴⁹

This is not by any means wholly in the form of welfare payments. This includes spending on public sector workers’ salaries, pensions, public service delivery and capital expenditure, too. However, the “balance” between the net contributor and net recipient regions is in excess of £60 billion per year.⁵⁰

The UK’s regional net fiscal balance broadly reflects productivity performance. This means that regional imbalances are one of the causes of higher pressures on public spending and a large state. If more regions beyond London and the South East were economically self-sustaining, the burden of tax on the net contributor regions for internal transfers could be eased.

Figure 13: Gross value added per hour worked by ILT3 region 2000 and 2022

Source: ONS⁵¹

Figure 14: Change in gross value added by ITL3 region 2004-2022

Source: ONS⁵²

Figure 15: Regional GVA per capita (2022) and net fiscal contribution

4. Investment

Long-term growth comes from investment, not consumption, but Britain does not invest enough. It erects severe supply-side barriers to private sector investment and has hollowed out public capital spending. It has valuable financial services but UK businesses too often prioritise short-term profitability over capital investment. There has been a neglect of investment in automation and skills.

Investment and return?

The UK is a low-investment economy. This matters because investment is the ultimate driver of productivity and long-term economic growth. Yet overall investment rates have been around 17-18% compared to the OECD average of 22%.⁵⁴This has been true both of public investment and private investment. If UK business investment had matched the average of France, Germany and the US since 2008 our GDP would be 4% higher today, boosting wages by around £1,250 a year.⁵⁵

Figure 16: UK Gross Fixed Capital Formation (GFCF) as a share of GDP and G7 comparators

One of the major barriers to private investment is the tangleweb of planning and regulatory barriers from which the UK suffers, plus the rising cost of core inputs such as energy. Bureaucratic, regulatory and cost barriers make investment in fixed capital, particularly plant, machinery and laboratory space, burdensome and long-winded. Political uncertainty and changes of economic strategy have not helped. Sensible measures have been implemented such as full expensing, introduced in the Spring Budget of 2023, which allows companies to offset 100% of certain capital expenses from taxable profits in the first year the investment is made.⁵⁷ Rather than simply increasing corporate profits, this creates an incentive to invest. 

However, there are less widely discussed hurdles, too. Britain is a low-savings, high-consumption economy.⁵⁸ This means less money available in capital markets for productive deployment. It also has a high-performing but disproportionately large financial sector relative to the real economy. This sector provides a vital global hub of high value-added economic activity where Britain has a real comparative advantage. But there are also problems around short-term profit maximising being prioritised over capital investment. And while the financial sector is strong, access to long-term patient capital – long-term investments focused on building strong business foundations for sustained future growth – can be limited, with a shortfall estimated by UK Finance of between £3 billion and £6 billion.⁵⁹

The UK spends less on R&D as a share of GDP than major comparator countries. At 2.9% it sits below the OECD average of 3% and falls behind Germany, Belgium, Israel, South Korea and the United States.⁶⁰ This is partly due to lower public investment and partly due to private business investment lagging countries like the US, and is heavily regionally concentrated in the South East (over 50%), and in a few sectors such as pharmaceuticals, aerospace and IT. This is partly due to a lack of crowding-in dynamics beyond the South East and partly due to the UK’s sectoral mix – industries such as high-value manufacturing are more likely to invest in R&D than services sectors.⁶¹

Funny money

Britain also experimented with a period of sustained low and negative real interest rates in the wake of the 2008 crisis.⁶²The purpose of this monetary loosening was to reduce the cost of corporate borrowing, reduce risk and incentivise investment in capital, training and R&D.

This is not what ended up happening. Partly due to global uncertainty and weak domestic demand, but also due to corporate incentives and priorities, cash ended up going into corporate savings, dividends and share buybacks.⁶³ Monetary loosening also caused inflation of the real estate market by fuelling mortgage credit.⁶⁴ And the attempt at monetary stimulus was also in tension with a contractionary fiscal approach pulling in the opposite direction. 

Science and Technology investment

The UK has significant strengths in science and technology R&D, especially in its top universities. The main vehicle for public investment is UK Research and Innovation (UKRI), which oversees £8.8 billion of spending annually.⁶⁵ Early stage innovation is strong but growth stage finance is weaker than the seed and angel investor environment. There remain significant regional disparities in investment in science and technology. And UK public investment has been disparate rather than focusing on specific sectors for growth, despite numerous science and technology strategies.

5. Sectoral balance

Manufacturing industries often have the highest potential for productivity growth yet represent just 8% of UK GDP – lower than any other comparable economy. We are too dependent on sectors like hospitality, retail and public sector work which in turn rely on migration, and  Britain struggles to scale up innovative businesses. The decline of production sectors disproportionately affects regions outside the South East.

One reason Britain struggles to grow is that it lacks high-growth industries. Not all sectors have the capacity for equal rates of productivity growth and not all sectors are equally important as a share of the national economy. 

Simply put, high-growth industries form too small a share of GDP while low-growth ones form too high a share. 81% of the UK economy is service-based,⁶⁶ and productivity gains in services tend to be harder to achieve and more incremental. In contrast, manufacturing has an inherently greater capacity for productivity improvements since innovation can be applied to capital to improve output through technology and investment in machinery, automation and production processes.

Accommodation and food services, for example, represent 3% of GDP but have had negative productivity growth since 2001. Manufacturing represents now just 8.6% of GDP according to the most recent data,⁶⁷ but has among the strongest productivity growth.

The UK’s most productive sectors, including high-value manufacturing, pharmaceuticals and life sciences, financial services and software technology are not large enough as a share of national income. Likewise, Britain’s strengths in innovation, particularly science and technology, are world-leading but it struggles to convert this fully into economic output. It struggles in particular with the scale-up phase of business growth, capital financing and retaining companies on-shore.⁶⁸ And too many British companies simply stagnate – one in six medium-sized businesses have been identified as at risk of becoming “zombies”, meaning they simply cover operating costs without turning a profit.⁶⁹

Manufacturing jobs pay on average 12% more per hour worked, due mostly to being more productive.⁷⁰ Yet the UK is among the most service-dominated in the world, well below either European or OECD averages,⁷¹ with its manufacturing declining to just 2% of global output compared to China, which accounts for 30%.⁷² This trend towards deindustrialisation disproportionately affects regions outside the South East, which have historically depended more on high-value manufacturing industries and where there are fewer high-value service sectors.

This is to say nothing of the risk presented to supply chain security presented by advanced on-shore deindustrialisation – a risk made all the more apparent in an era of burgeoning global trade wars and acute dependency on strategically hostile trading partners and regions of high geopolitical risk.⁷³ 

The loss of productive hard industry is therefore simultaneously damaging for growth, since manufacturing has high growth potential and higher productivity, harmful for fairness, since it reduces good quality employment and intensifies regional disparities, and problematic for security, since it means the running down of domestic capacity and ever more exposure to global risks.

Figure 17: Productivity growth and share of gross value added, UK sectors, 2022

High migration, low growth

The role of immigration in the UK economy is much debated. At an extremely simple level, inward migration raises total GDP.⁷⁵ However, there is no correlation between migration levels and GDP per capita. In fact, increasing the population faster than the rate of growth will by definition cause GDP per capita to fall.⁷⁶ And increasing the population without equivalent investment in public services and infrastructure will inevitably cause the UK capital stock to be spread more thinly.

There are also debates regarding the fiscal impact of migration. This depends in large part on the methodology for measurement. It is usually assumed by entities like HM Treasury and the OBR that immigration is fiscally net positive, at least in the initial years before migrants gain access to public funds. However, this is significantly alloyed by migrants on work visas bringing fiscally negative dependents who do not work. And most importantly, migrants who receive Indefinite Leave to Remain (ILR) and access to welfare benefits and the state pension, and stay in the UK permanently, stand much less chance of being a lifetime net contributor, depending on their average earnings. 

Just over 52% of British people are net fiscal recipients from the state.⁷⁷ Given the UK median salary is approximately £37,400,⁷⁸ this would imply the earnings threshold to be a net contributor is a little over this. Migrants on salary discount visas and those who arrived before the threshold was increased in 2024 stand a high chance of being fiscally net negative. And this does not account for those who overstay student or work visas illegally, claim asylum, or otherwise move into illegal work. And this does not factor in the impact of very high net migration on housing costs or the distributional impact of migration on local wages, a dynamic that has now been recognised by the IMF.⁷⁹

There is a wider question here, which is the dependency of the UK economy on low-wage migration. Nearly 14% of workers in wholesale and retail are migrants, and this sector accounts for 10.1% of UK gross value added. Likewise health and social work represents 7.9% of GVA and migrants account for around 15% of its workforce.⁸⁰ Wholesale and retail trade and manufacturing add similar amounts to the national income each year – £205 billion and £197 billion respectively. However, manufacturing’s share of migrant workers is around half that of wholesale and retail.⁸¹

If the UK does not wish to be dependent on high-volume, low-wage, low-skill migration then it will need to reduce drastically the supply of labour from abroad, which will force employers to work with the contours of the UK labour market. Welfare reform will be required to reduce economic inactivity and free up labour. And employers will have to make productivity-boosting investments in skills and automation.

The UK will also need to accept that its more migration-reliant sectors may struggle and find solutions. This may mean increasing wages in necessary public sector areas like social care, or it may mean allowing less productive private sector businesses which rely on migration to die off. This should be seen as part of creative destruction, “unhooking” the economy from its low-productivity, low-wage equilibrium.

Figure 18: Productivity growth between 2014-2019 and increase in share of non-UK born workers between 2014 – 2024, by industry

Source: ONS, Department for Education⁸²

Lack of industrial strategy

Britain has a globally leading edge in certain sectors, including life sciences, biomanufacturing, AI, pharmaceuticals, semiconductor design and financial and professional services. It also retains high-value advanced manufacturing champions like BAE Systems and Rolls Royce. The “Golden Triangle” of Oxford, Cambridge and London is home to some of the world’s leading scientific and technological innovation, including in the startup tech sector and from within the universities. 

However, the UK has been very reluctant so far to pursue any kind of active, strategic approach towards its sectoral mix. Although there have been multiple “industrial strategies” published by successive governments, these have not been translated into concrete long-term interventions that can build long-term capacity.⁸³

The UK faces certain key threats and risks including loss of technologically, economically or strategically significant industries and the failure to grow these industries. Britain struggles with commercialising its innovation in AI and quantum computing and cannot always retain intellectual property, with significant offshoring to the US. Advanced manufacturing robotics have struggled to scale up. The UK has strength in chip design, Arm being the most obvious example, but is highly reliant on international supply chains for chip manufacturing. Its pharmaceutical sector is strong but lacks on-shore vaccine manufacturing infrastructure. The removal of Huawei from its telecommunications infrastructure exposed its lack of alternative suppliers for 5G and its reliance on a small number of overseas suppliers. And the UK has minimal domestic extraction or processing capacity for minerals such as lithium, cobalt or rare earths, which are foundational for electronics.⁸⁴ While the UK has historically retained significant strengths in chemicals manufacturing, in recent years the UK chemicals sector has been in freefall, largely due to energy costs.⁸⁵

Despite its longstanding policy commitment to net zero, the UK has failed to develop on-shore green technology or infrastructure manufacturing, remaining highly depending on imports for batteries, EVs, solar panels and wind turbines.⁸⁶ 

The Information Technology and Innovation Foundation (ITIF) ranks the UK in the top ten producers of strategically significant industrial outputs in its Hamilton Index. It notes in particular the country’s strengths in aerospace and IT. However, in most other listed sectors it is in relative global decline.⁸⁷

The UK therefore needs a pragmatic and achievable industrial strategy which seeks to build on existing strengths, facilitates commercialisation of innovation, boosts applied R&D and builds supply chain resilience through on-shoring and near-shoring where possible. This will involve a combination of policy levers including the better targeting of limited subsidy budgets, tax relief, transformation of institutions like the British Business Bank, mechanisms to improve strategic sectors’ access to credit, co-investment with golden shared for government, interventions to prevent offshoring where necessary, a policy of energy abundance and re-equitisation of the institutional investor landscape with a focus on strategic industrial priorities. And it should pursue place-based strategies to create industrial clusters and the agglomeration effects that will flow from this.

One of the biggest under-used policy levers at the Government’s disposal is its procurement budget. Factoring in the whole public sector including local authorities, procurement represents one-third of government spending.⁸⁸ The EU’s procurement framework is focused on deepening the Single Market and promoting cross-border access. However, outside the Single Market the UK can repurpose national-level procurement spending in a way that targets industrial strategic priorities, including building vital capacity domestically. 

6. Housing & Planning 

State imposed barriers to residential and commercial building are a major breakwater on market-driven growth. Some of these planning restrictions are environmental, some are building regulations and others concern approval for the use of land. Judicial review, quango oversight and consultations add to this stranglehold. Major reform to planning laws is needed so the UK can build again, and net migration cannot outpace housebuilding.

Britain has a well documented housing shortage of more than four million units.⁸⁹ It has one of the lowest vacant property rates in the OECD at 5.4% according to the 2021 census.⁹⁰ The mathematics of this are quite simple: the UK has rapidly grown the population at a rate much faster than the pace of housebuilding.

As a result, average house prices are now eight times average income, and this is even worse in London. This compares to an average of three times in the 1970s. The average first-time buyer deposit in England is now £68,000,⁹¹ with a deposit now taking on average eight to ten years to save for.⁹²

At the same time, mortgage credit has expanded dramatically as a share of GDP has risen from around 40% in the 1990s to around 60% now.⁹³ This increase in mortgage credit, which includes lending to commercial and buy-to-let investors as well as owner occupiers, has inflated property values on the demand side by increasing purchasing power in a restricted market.

In London in particular the financialisation of housing as an investment asset for overseas and institutional investors has inflated demand and absorbed limited housing stock as London has become an attractive global real estate investment destination – London was the largest destination in Europe for overseas capital inflows into real estate in 2024.⁹⁴ In 2024, overseas purchasers accounted for 45% of property purchases in prime central London (PCL), up from 39% in 2022.⁹⁵

This would be less of a problem in an environment of housing supply abundance. However, with the supply of new housing incredibly restricted, the incentive for institutional investors to speculate on UK land value appreciation is only enhanced, creating an inflationary feedback loop and making owner occupation harder still. And liberalisation of housing supply will not bring down prices if net migration continues to outstrip housebuilding.

Radical reform to housing in Britain will therefore require significant supply liberalisation, particularly in areas of high density and high demand such as cities. But it will also require serious restrictions on demand by reducing immigration and by taking steps to limit overseas ownership of new housing and investment properties remaining vacant.

Figure 19: House build completions, net migration and housing deficit, 1994 – 2025

Figure 20: Cumulative net additional dwellings deficit in England, 2013 – 2023

Source: Ministry of Housing Communities & Local Government, Department for Levelling Up, Housing & Communities,⁹⁷ Onward analysis

Planning, regulation and infrastructure

The UK’s severe challenges in building new infrastructure and approving commercial planning applications are well documented.⁹⁸ In 2024 only 19% of major planning applications were approved within the 13 week target at the district level.⁹⁹ And at a national level 34% of major planning decisions took more than four months.¹⁰⁰

Approval rates are low. At the end of 2024 for every five planning applications granted, four were rejected.¹⁰¹The embedded resistance to new development flows from a web of legislation and regulations, starting with the Town and Country Planning Act.¹⁰² Approval processes remain overwhelmingly in the gift of local authorities who do not share responsibility for nationwide economic growth. And while the Minister for Housing, Communities and Local Government (MHCLG) retains significant statutory powers to call in planning applications for central review, there are significant political barriers to the exercise of this power.

Building and environmental regulations present serious barriers to development, and the consultation and judicial review (JR) process mires building projects in bureaucracy and the costs and delays inherent in lengthy legal challenge.¹⁰³ And far too much power has been delegated to unaccountable quangos whose decisions are never subject to democratic review, and whose incentives are not calibrated towards economic growth.¹⁰⁴

Figure 21: AmericaNumber of planning applications (that require approval) at the district level approved and rejected, 2014 – 2024

Planning applications are expensive: more than £250 million has been spent on the Lower Thames Crossing’s 63,000 page planning application, for example. In effect, this means a quarter of a billion of public money spent so one branch of government can ask another branch of government for permission. This is more than double the cost of building Norway’s Laerdal tunnel, the longest road tunnel in the world, just for the planning stage of a project.¹⁰⁶

When infrastructure is built, the cost is much higher in the UK than in other comparable countries.¹⁰⁷ For example, the average cost for a flat road in the UK is £8.45 million per lane kilometre, compared to the European average of £5.77 million and £4.22 million in France. Similarly, UK road projects face both the highest regularity (69%) and severity (66%) of cost overruns compared to peer countries.¹⁰⁸

Figure 22: Costs of infrastructure projects, by type of project, comparable projects only

Rail

Road

Social

Source: Boston Consulting Group¹⁰⁹

7. Energy

High energy prices devastate energy intensive industries and destroy real household incomes. Prosperity tracks energy consumption almost exactly. Energy abundance must be the priority to reverse deindustrialisation, restart growth and bring costs down. Britain has allowed itself to become far too dependent on importing gas and electricity and must reform contracts and pricing while prioritising boosting domestic energy supply. 

Britain now has the highest energy prices in Europe.¹¹⁰ This is due to a number of factors. One is its high reliance on natural gas both for electricity generation and for home heating. Around 40% of UK electricity is generated from gas compared to a 22% EU average, and 85% of British homes use gas for heating – higher than in most European countries.¹¹¹ This leaves it exposed to fluctuations in wholesale gas prices. 

At the same time it has extremely limited gas storage facilities, with capacity to cover only around five days of consumption. In Germany, in contrast, gas can be stored for up to 90 days. As a result, approximately 35% of UK produced gas is exported.¹¹² And policy choices have been made not to pursue onshore energy supply development through hydraulic fracking or expanding North Sea oil licences.

The structure of the UK electricity market also pushes up both household and industrial energy prices, as prices are set according to the most expensive source needed to meet demand – typically gas, which sets electricity prices more than 80% of the time.¹¹³

Industrial energy costs are a severe problem for the UK economy. While it used to have lower prices than the EU average, UK firms now pay more than four times as much for electricity than the cheapest locations in Europe,¹¹⁴ and 150% above the EU average.¹¹⁵ And despite having similar electricity prices at the turn of the century, energy in the UK is four times that of the US.¹¹⁶ This is having a particularly damaging impact on the regionally important chemicals sector,¹¹⁷ which has contracted by more than a third in three years,¹¹⁸ in line with the drop in output of of Energy Intensive Industries (EIIs) since 2021 more widely.¹¹⁹ Output in the UK’s EIIs is at its lowest in 35 years.¹²⁰

Decarbonisation and deindustrialisation 

Britain has also historically been a part of the European carbon pricing mechanism, which was largely replicated into UK law after Brexit, and has now been reintroduced by the Labour Government as part of its EU reset.¹²¹ This has disproportionately harmed energy intensive industries like manufacturing, but is also a significant cost burden for energy intensive new technologies like data centres and gigafactories.

The UK has made rapid progress towards territorial – that is to say on-shore – decarbonisation. But its contribution to global carbon emissions when measured by consumption is actually increasing.¹²² This is because industrial production has been offshored to manufacturing intensive net exporters like China, which still makes extensive use of fossil fuels including coal-based electricity generation. Britain’s “unilateral” approach towards decarbonising has therefore reduced UK growth and accelerated offshoring without reducing our net contribution to climate change.

Decarbonisation has therefore been pursued not by replacing the supply of fossil fuels with renewable alternatives, but by reducing Britain’s energy consumption – the UK has reduced per capita consumption of electricity more than any other OECD country, and this is due almost entirely to loss of industry. Meanwhile since 2003 China has more than doubled its energy use.¹²³

Looking at where energy use has fallen, manufacturing accounts for two thirds of total energy use reduction, while household consumption accounted for a quarter, and just 9% from the rest of the economy.¹²⁴

This approach is nonsensical.

Figure 23: Industrial energy prices in the EU, average, in pence per KwH, including taxes

Figure 24: Change in energy consumption per capita, 2003 – 2023, G20

Source: Our World in Data¹²⁶

Energy matters

Energy is a critical factor of production. Without it economies cannot function. In fact, per capita economic growth almost exactly tracks changes in per capita energy use.

UK energy policy has effectively pursued a de-growth approach without this ever being explicitly stated. It is vital that we jettison the idea that growth can be achieved without secure and affordable energy. The alternative is simply having less economic activity.

Figure 25:  Annual absolute change in energy consumption and year-on-year percentage change in GDP per capita growth, 1966 – 2022, whole world

8. Trade

Recent events show how exposed the UK is to changes in international trade conditions. Britain has always been a trading nation and its households benefit from imports. But it has become reliant on strategic enemies such as China and vulnerable jurisdictions like Taiwan for critical imports like steel and semiconductors and for the capital to finance its trade deficit. It needs to boost domestic production, reshore and friendshore supply chains where it is beneficial and decouple from high-risk supply chains. It must also develop a domestic start-to-finish defence manufacturing capability and boost exports.

The UK runs a large and persistent trade deficit – its net exports of services do not fully finance its deficit in goods. This deficit when added together with other net inflows and outflows of income forms the “current account”. Current account deficits are common in developed economies, but they must ultimately be financed somehow. In short, the UK does not pay its way in the world by making and doing enough of what the world wants and needs to buy.¹²⁸

By most indicators the UK underperforms on trade. Trade as a share of GDP is lower than the OECD average at 55%, compared to Germany’s at 90%.¹²⁹ And its share of global trade has declined to just 3.5% of exports and 3.7% of imports, down from 5% and 5% respectively in 2005. Meanwhile China’s share of global exports is now more than 17%.¹³⁰ Imports are vital for the UK economy. This is true not only for household consumers but also for manufacturers, who rely on globalised supply chains. In fact most exporters are also major importers.

However, significant imbalances arise when a country’s exports do not pay for its imports. This tends to have a negative distributional impact, harming former production communities and sectors. Persistent current account deficits tend towards higher inequality. And a declining share of trade is an indicator that an economy is doing less than it could or should be.

Trump tariffs and globalisation

The global tariffs imposed by the US Administration are causing significant trade disruption and this is likely to harm the UK. It will be necessary to improve both supply chain resilience as trade friction increases and to improve export competitiveness if the US market is more closed off.

It is however important to recognise the global imbalances in trade to which the Trump Administration is seeking respond. China’s large trade surplus is not only the product of Chinese innovation, competitiveness and efficiency. It is also the product of Beijing’s aggressive trade policies. These principally include manipulation of China’s currency, the renminbi, to keep its exports artificially competitive, significant subsidies and the suppression of workers’ rights and wages to reduce labour costs. China has been able to pursue these trade distortions in part because it is classified as a developing country by the WTO.¹³¹

The purpose of these “beggar-thy-neighbour” policies is to create Chinese export dominance, to control a large share of global manufacturing capacity and to gain a controlling interest in assets in trade deficit countries like the UK and US, where the proceeds of its trade surplus are invested.¹³²

The American attempt to respond to Chinese distortions and the imbalances they create domestically within the US is likely to trigger a wider rethink of the progress of globalisation. Already, otherwise liberal economies are beginning to pursue national industrial policies to protect their own industries and supply chains, and to secure access to strategically important materials and technologies.¹³³ It will be insufficient in a world where such approaches are the norm for the UK to pursue a wholly laissez-faire approach towards trade – others will not be doing the same.

Rather, Britain should pursue a radically pro-growth, supply-side policy to unlock market potential domestically, combined with a much more pragmatic and strategic approach towards critical industrial capacity and trade performance.

Figure 26: Trade as a percentage of GDP, OECD comparators

Source: UN Trade and Development Data Hub¹³⁵ Onward analysis

9. Capital

Like the United States, Britain is a consumer of last resort for goods from surplus countries like China. This is financed by capital inflows from abroad into equities, real estate, debt and infrastructure. This capital is not necessarily productively deployed, and the UK’s own capital markets are not optimally invested, either. We must take steps to unlock dormant capital and reduce dependency on foreign ownership of key national assets.

The other side of the current account deficit “coin” is the UK’s capital (or “financial”) account surplus. This represents the flow of capital into asset ownership, including real estate, equities and debt. This net inflow of capital each year is what allows Britain’s current account deficit to be financed and for imports to be paid for. 

Some economists believe this to be perfectly fine. Net exporters send the UK goods and in exchange Britain sends them “bits of paper” or IOUs. There is some truth to this; foreign investors’ desire to put capital into the UK allows us to buy goods from abroad, keeping goods cheaper and lowering our cost of living. But there is a downside, which is the loss of sovereignty implied by mass overseas ownership of UK assets, and the risk and exposure presented by this capital surplus dependency. Ultimately debts, whether corporate or public, have to be serviced, and any loss of confidence in the UK as a destination of asset investment would cause major problems for Britain’s ability to finance its balance of payments. 

Furthermore, these inward capital flows put upward pressure on sterling, crowding out and disincentivising domestic investment and saving. This in turn reduces the availability of domestic private capital for corporate financing and in turn means less liquidity for the real economy.¹³⁶

Figure 28: Cumulative financial account and net international investment position (NIIP) as a share of GDP, Q1 2000 to Q4 2019

Source: ONS¹³⁷

Alongside other countries with persistent trade deficits, like the United States, the UK is a destination for global excess savings generated by the trade surpluses of other countries. This phenomenon has been well documented by economic thinkers such as Michael Pettis, Steve Miran, Oren Cass and Dani Rodrik.¹³⁸

The global reserve status of the US dollar and the utility of sterling as an investment currency create demand for assets denominated in those currencies. To accommodate these global capital inflows, domestic savings will decline. The upward pressure on the currencies makes UK and US exports less competitive as they become more expensive in global terms, while purchasing power to buy imports is increased. The overall impact of large foreign capital surpluses is therefore to disincentivise domestic investment, and that the surplus must be mirrored by a current account deficit. As a result, overseas investors acquire an ever greater share of UK assets and both public and private debt must rise.¹³⁹

Capital issues

The supply of UK private capital is also unproductively deployed. This is partly due to the impact of regulatory reforms to pension fund investments made under New Labour with the aim of protecting people’s savings. But the result has been huge over-investment in real estate and bonds and consequent de-equitisation (divestment from equities.¹⁴⁰

A major barrier to stronger UK growth is this flight from productive investments. UK firms struggle with access to capital finance, particularly in the economically important manufacturing and science and technology sectors. Pension fund reform is therefore needed both to generate stronger receipts for savers and to provide British firms with adequate finance. 

There should be a much greater role for institutions like the British Business Bank to direct national savings towards productive and potentially high-return industries with strategic significance, particularly in emerging technologies and critical supply chain capacity. 

Figure 29: Composition of UK household net wealth, 2018

A feature of the UK’s dependency on overseas capital is the level of foreign ownership of its equities. Overseas ownership of UK quoted shares in 1963 was just 7% and in 1997 this was 28%. It is now nearly 60%.¹⁴²

Britain therefore struggles with the misallocation of its on-shore wealth into real estate rather than capital markets, and with its dependency on inward capital flows into housing, commercial property, public and private debt and equities. This model of a highly unbalanced relationship between national income and foreign investment relies on a constant flow of overseas capital and of assets for foreigners to purchase, and therefore on international investment confidence in the UK, and leaves the country more exposed to fluctuations in interest rates in corporate debt markets and to changes in bond yields. It also increases inequality by moving the centre of economic gravity towards financial services and asset management, largely concentrated in London, and away from manufacturing, which is largely based outside the South East.¹⁴³

Britain’s dependency on foreign capital to finance its consumption and public borrowing requirements has been described as relying “on the kindness of strangers”.¹⁴⁴

10. Skills

Britain significantly over-produces graduates and tertiary education is not linked to the needs of the economy. This means high growth potential sectors lack the skills they need and some industries need migrant workers from overseas to plug the gap. Reforming post-18 education, welfare and visa rules together will be vital to ensure we are training the skilled workers the economy needs.

Britain has an unprecedented rate of entry into higher education, peaking at 38.2% in 2021 and falling only slightly to 36.4% in 2024. In 2006 this was just 24.7%.¹⁴⁵ More than a third of UK residents now hold a higher level qualification,¹⁴⁶ and 60% of 25-34 year-olds, compared to the OECD average of 47%.¹⁴⁷

In theory the UK population is more educated than ever before. But the financial returns on higher education have been falling.¹⁴⁸ The average graduate now earns only 1.6 times the national living wage, down from 2.5 times more in 2001.¹⁴⁹ The real returns to higher education once loans and opportunity cost have been taken into account can even be negative.¹⁵⁰ For those born between 1993 and 1997 student loan repayments have cut a fifth off the average net graduate premium.¹⁵¹ 

And there is evidence that the UK overproduces graduates – one in three were found to be over-educated for their current role in 2019.¹⁵² Even among those who graduated 20 years ago, when far fewer attended university and the graduate premium was 10% higher,¹⁵³ about one in five would have been better off financially had they not gone to university.¹⁵⁴ 17 year-olds, who are legal minors, are both allowed and encouraged to take on tens of thousands in debt without proper information about likely return. More than a third of students will not repay their loans in full.¹⁵⁵

Figure 30: Graduates enrolled in courses (2020-21) and median earnings 5 years after graduation

Too many graduates are taking low value-added courses, with many degree types yielding median earnings after five years below the equivalent apprentice salary. Creative arts and design in particular is an example of over-production relative to economic return. 

Meanwhile, a graduate earning £50,000 per year with three children under 18 and a student loan to repay can face a marginal rate of tax of 80%,¹⁵⁷ given the high income child benefit charge (HICBC).¹⁵⁸ Not only are financial returns to degrees in return; the cost of loan servicing is combining with the tax structure to create profound disincentives to work and to earn more. 

Despite this graduate over-production, the UK still has a skills shortage, with 62% of organisations reporting difficulties finding workers with the right skills.¹⁵⁹ The UK has little skills planning, with training entirely supply-driven rather than demand-driven.

Britain has particular shortages in science, engineering, mathematics and technology (STEM). Nearly half of UK STEM employers say they need to look abroad to find the right skills for their business,¹⁶⁰ and the STEM skills gap has been projected to cost the UK economy £120 billion by 2030.¹⁶¹

Meanwhile, the number of apprenticeships available has been in steep decline, falling by a third between 2016 and 2023.¹⁶² The Apprenticeship Levy was designed to increase the supply of apprenticeships by creating a financial incentive for businesses to offer them, but has not yielded the desired results, while remaining largely unpopular with businesses.¹⁶³

The introduction of T-levels in 2020, a vocational alternative to A-levels, was intended to create stronger alternatives to a traditional academic route. However, uptake has not been strong and there have been calls for reform.¹⁶⁴

Figure 31: Skills shortage vacancies as a proportion of all vacancies, by sector

Source: Department for Education¹⁶⁵

The UK higher education system is in need of major reform. The UK has some of the world’s most outstanding universities, but also much weaker ones, and not all students receive a good or fair return on their investment. Meanwhile, it is far from clear that the sector is producing the technical and economically valuable skills the economy requires.

A much more economically-driven approach, focused on building valuable skills and more localised planning between education providers and businesses is required, along the lines of Germany’s dual education system.¹⁶⁶

The way forwards

Britain’s problem is not a lack of potential. It is home to some of the world’s greatest innovation, and innovation is what drives growth. But major surgery will be needed to re-engineer its economy into one that is higher-investment, higher-wage, higher-growth and more productive. 

Crucially, faster growth and greater fairness are not in tension – they can only be achieved together. Without opportunity for younger people to acquire assets, talent will leave and incentives will be killed off. Likewise Britain’s high-spending, high-borrowing state will never be reduced if regional performance beyond the South East is not achieved. Above all, capturing more value in global supply chains would go hand in hand with greater economic security, as Britain’s degree of dependence on hostile powers like China will be reduced.

The web of restrictions, taxes and regulations that hold back market led growth must be unpicked. But at the same time a strategic state is needed to rebalance Britain’s trading relationship with the world, incentivise high-value industries to invest here and reduce Britain’s reliance on the kindness of strangers. Above all, a higher growth economy will require political boldness and radical change. 

These challenges are profound and frequently intersect – the problems must be faced simultaneously. But it is not acceptable for Britain to go into decline. Onward’s Rebuilding our Economy programme will seek to tackle the ten themes of this launch paper in the coming months and years, proposing major changes to UK public policy and the solutions Britain’s economy needs. 

The UK has been stuck for nearly two decades. But a turnaround is possible – it will be down to Britain’s leaders and policymakers to make the choice for a different and better future.

1. https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/ihyp/pn2 ↩︎
2. https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationprojections ↩︎
3. https://cps.org.uk/research/justice-for-the-young/ ↩︎
4. https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/mwb6/ukea ↩︎
5. Office for National Statistics, Average weekly earnings in Great Britain, February 2025; OECD Data Explorer, Average annual wages ↩︎
6. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/ukproductivityintroduction/octobertodecember2024andjulytoseptember2024 ↩︎
7. https://www.ons.gov.uk/economy/economicoutputandproductivity/productivitymeasures/bulletins/internationalcomparisonsofproductivityfinalestimates/2021 ↩︎
8. Office for National Statistics, Real average weekly earnings using consumer price inflation (seasonally adjusted), 13 May 2025 ↩︎
9. https://www.gov.uk/government/publications/levelling-up-the-united-kingdom ↩︎
10. https://www.ft.com/content/e5c741a7-befa-4d49-a819-f1b0510a9802 ↩︎
11. https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/conceptionandfertilityrates/articles/howisthefertilityratechanginginenglandandwales/2024-10-28 ↩︎
12. https://www.ukonward.com/reports/breaking-blue-2/ ↩︎
13. https://www.sambowman.co/p/boosters-and-doomsters ↩︎
14. Figure 2.1, https://ifs.org.uk/publications/conservatives-and-economy-2010-24 ↩︎
15. https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/mwb6/ukea ↩︎
16. Data for 2024 is available for GDP per capita, but omitted to match the latest available data year across all metrics. Data is available for GDP per capita and output per worker since 1960, but earliest available data is 1997 for median weekly wages. Wages are shown on the secondary axis, GDP and productivity measures are shown on the primary axis.  ↩︎
17. Office for National Statistics, Employee earnings in the UK: 2024, 29 October 2024
    ↩︎
18. Office for National Statistics, Output per hour worked, 15 May 2025 ↩︎
19. Office for National Statistics, UK Real net domestic product per capita, 28 March 2025 ↩︎
20. https://ifs.org.uk/articles/income-and-wealth-inequality-explained-5-charts ↩︎
21. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours ↩︎
22. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours ↩︎
23. Department for Work and Pensions (DWP), Households below average income: an analysis of the income distribution FYE 1995 to FYE 2021, 24 May 2022 ↩︎
24. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/2024 ↩︎
25. https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2023 ↩︎
26. https://www.jrf.org.uk/narrative-change/changing-the-narrative-on-wealth-inequality ↩︎
27. https://commonslibrary.parliament.uk/research-briefings/cbp-10210/ ↩︎
28. https://obr.uk/box/the-uks-tax-burden-in-historical-and-international-context/; total government expenditure as a share of GDP is higher than this because it includes other sources of income than tax, such as receivables and borrowing, and is around 40% – a level not seen since the Second World War, see https://commonslibrary.parliament.uk/research-briefings/cbp-8513/?utm_source=chatgpt.com ↩︎
29. https://www.oecd.org/en/about/news/press-releases/2024/11/average-tax-revenues-in-the-oecd-remain-steady-as-spending-pressures-grow.html?utm_source=chatgpt.com ↩︎
30. https://ifs.org.uk/articles/how-tax-burden-high-when-most-us-are-taxed-so-low ↩︎
31. See The Times, Is Britain a high-tax nation compared to other countries?, 30 March 2025 ↩︎
32. https://ifs.org.uk/articles/how-tax-burden-high-when-most-us-are-taxed-so-low ↩︎
33. Ibid ↩︎
34. https://commonslibrary.parliament.uk/research-briefings/cbp-8513/ ↩︎
35. https://ifs.org.uk/taxlab/taxlab-data-item/higher-rate-threshold-over-time ↩︎
36. https://commonslibrary.parliament.uk/research-briefings/cbp-8495/#:~:text=The%20personal%20allowance%20is%20increased,%C2%A350%2C000%20for%202019%2F20 ↩︎
37. Using Bank of England inflation calculator, https://www.bankofengland.co.uk/monetary-policy/inflation/inflation-calculator ↩︎
38. https://ifs.org.uk/taxlab/taxlab-data-item/higher-rate-threshold-over-time ↩︎
39. https://www.thetimes.com/article/britain-tax-burden-jeremy-hunt-budget-bslqlg8jj ↩︎
40. https://taxpolicy.org.uk/2023/09/24/70percent/ ↩︎
41. https://commonslibrary.parliament.uk/reducing-the-universal-credit-taper-rate-and-the-effect-on-incomes/ ↩︎
42. https://taxfoundation.org/data/all/global/corporate-tax-rates-by-country-2024/ ↩︎
43. https://www.wpi-strategy.com/new-report-from-wpi-recommends-cutting-business-rates-to-boost-the-levelling-up-agenda ↩︎
44. https://www.gov.uk/government/publications/vat-increasing-the-registration-and-deregistration-thresholds/increasing-the-vat-registration-threshold#:~:text=The%20VAT%20registration%20and%20deregistration,%C2%A385%2C000%20to%20%C2%A390%2C000 ↩︎
45. https://www.gov.uk/government/statistics/uk-stamp-tax-statistics/uk-stamp-tax-statistics-2023-to-2024-commentary ↩︎
46. OECD Data Explorer, Productivity levels ↩︎
47. Ibid. ↩︎
48. https://www.ons.gov.uk/surveys/informationforbusinesses/businesssurveys/annualsurveyofhoursandearningsashe ↩︎
49. https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/articles/countryandregionalpublicsectorfinances/financialyearending2023 ↩︎
50. Ibid. ↩︎
51. Office for National Statistics, Regional differences in productivity and household income, 17 May 2021 ↩︎
52. https://www.ons.gov.uk/economy/regionalaccounts/grossdisposablehouseholdincome/datasets/regionaldifferencesinproductivityandhouseholdincome ↩︎
53. Data for net fiscal contribution is available for 2023, but 2022 data is used to match the latest available data for regional GVA per capita. ↩︎
54. https://www.ons.gov.uk/economy/grossdomesticproductgdp/articles/aninternationalcomparisonofgrossfixedcapitalformation/2017-11-02 ↩︎
55. https://economy2030.resolutionfoundation.org/wp-content/uploads/2023/12/Ending-stagnation-final-report.pdf ↩︎
56. https://data.worldbank.org/indicator/NE.GDI.FTOT.ZS ↩︎
57. https://www.gov.uk/government/publications/full-expensing/spring-budget-2023-full-expensing ↩︎
58. https://ifs.org.uk/publications/who-has-low-savings-and-how-problematic-can-be ↩︎
59. https://www.ukfinance.org.uk/blogs/impatient-growth-time-unlock-patient-capital%25E2%2580%25A6 ↩︎
60. https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS?locations=OE ↩︎
61. https://www.ukonward.com/reports/making-a-comeback/ ↩︎
62. https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp ↩︎
63. https://www.hl.co.uk/news/the-rise-of-share-buybacks-what-do-they-mean-for-investors-in-2024 ↩︎
64. https://positivemoney.org/eu/update/monetary-policy-housing-inequality/ ↩︎
65. https://www.ukri.org/wp-content/uploads/2025/04/UKRI-030425-BudgetAllocations25-26-Explainer.pdf ↩︎
66. https://commonslibrary.parliament.uk/research-briefings/sn02786/#:~:text=The%20full%20suite%20of%20indicators,services%20output%20increased%20by%201.5%25 ↩︎
67. https://www.ons.gov.uk/economy/grossdomesticproductgdp ↩︎
68. https://digitalfutures.com/insights/thought-leadership/the-true-cost-of-offshoring-why-the-uk-must-invest-in-local-talent/ ↩︎
69. https://www.bdo.co.uk/en-gb/news/2025/sharp-increase-in-zombie-companies-in-uk-mid-market ↩︎
70. https://www.makeuk.org/insights/publications/uk-manufacturing-the-facts–2022#:~:text=With%20an%20annual%20output%20of,higher%20than%20the%20whole%20economy ↩︎
71. https://ourworldindata.org/grapher/manufacturing-value-added-to-gdp ↩︎
72. https://commonslibrary.parliament.uk/research-briefings/sn05206/ ↩︎
73. https://www.longtermresilience.org/reports/boosting-uk-supply-chain-resilience-to-mitigate-catastrophic-biological-risks/ ↩︎
74. https://www.ons.gov.uk/economy/grossvalueaddedgva/datasets/nominalandrealregionalgrossvalueaddedbalancedbyindustry & https://assets.publishing.service.gov.uk/media/63f4bee8d3bf7f62eaaf2e75/Skills_and_UK_productivity.pdf ↩︎
75. https://migrationobservatory.ox.ac.uk/resources/briefings/the-fiscal-impact-of-immigration-in-the-uk/ ↩︎
76. https://cps.org.uk/media/post/2024/mass-migration-not-delivering-promised-economic-benefits-say-jenrick-and-obrien/?utm_source=chatgpt.com ↩︎
77. https://backup.ons.gov.uk/wp-content/uploads/sites/3/2024/12/Effects-of-taxes-and-benefits-on-UK-household-income-financial-year-ending-2023.pdf ↩︎
78. https://backup.ons.gov.uk/wp-content/uploads/sites/3/2024/12/Effects-of-taxes-and-benefits-on-UK-household-income-financial-year-ending-2023.pdf ↩︎
79. https://www.telegraph.co.uk/business/2025/04/15/surge-in-migrants-pushing-down-wages-for-low-paid-britons/ ↩︎
80. https://www.telegraph.co.uk/business/2025/04/15/surge-in-migrants-pushing-down-wages-for-low-paid-britons/ ↩︎
81. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/migrationandthelabourmarketenglandandwales/census2021#human-health-and-social-work-activities-were-in-the-top-10-industrial-sectors-for-all-country-of-birth-groups ↩︎
82. Ibid. & Department for Education, Skills and Productivity: Estimating the contribution of educational attainment to productivity growth, February 2023 ↩︎
83. See Jones, R. (2001), http://www.softmachines.org/wordpress/?p=2566 ↩︎
84. https://www.bankofengland.co.uk/quarterly-bulletin/2024/2024/a-portrait-of-the-uks-global-supply-chain-exposure ↩︎
85. https://www.thechemicalengineer.com/news/uk-chemicals-sector-on-path-of-steady-decline-according-to-new-report/ ↩︎
86. https://www.rusi.org/explore-our-research/publications/occasional-papers/new-energy-supply-chains-uk-risk-chinese-dominance ↩︎
87. https://itif.org/publications/2023/12/13/2023-hamilton-index/ ↩︎
88. https://commonslibrary.parliament.uk/research-briefings/cbp-9317/ ↩︎
89. https://www.centreforcities.org/publication/the-housebuilding-crisis/#:~:text=Compared%20to%20the%20average%20European,homes%20a%20year%20is%20reached ↩︎
90. https://www.resolutionfoundation.org/app/uploads/2024/03/HO-Q1-2024-FINAL.pdf; according to OECD figures it is even lower at 3%, https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/2024 ↩︎
91. https://www.unbiased.co.uk/discover/mortgages-property/buying-a-home/average-first-time-buyer-deposit ↩︎
92. https://hqnetwork.co.uk/news/new-research-suggests-it-now-takes-a-decade-to-save-for-a-mortgage-deposit/ ↩︎
93. https://neweconomics.org/uploads/files/496c07a5b30026d43a_d1m6i26iy.pdf ↩︎
94. https://www.knightfrank.com/research/article/2025-02-18-the-core-opportunity?utm_source=chatgpt.com ↩︎
95. https://investropa.com/blogs/news/london-real-estate-market?utm_source=chatgpt.com ↩︎
96. Ministry of Housing Communities & Local Government (MHCLG), Department for Levelling Up, Housing & Communities (DLUHC), Live tables on housing supply: indicators of new supply [Last updated ↩︎
97. Ministry of Housing Communities & Local Government (MHCLG), Department for Levelling Up, Housing & Communities (DLUHC), Live tables on housing supply: indicators of new supply [Last updated ↩︎
98. https://www.britainremade.co.uk/Back%20to%20What%20We’re%20Good%20At%20%7C%20A%20plan%20to%20get%20Britain%20Building%20again ↩︎
99. Onward analysis of MHCLG statistics,  https://assets.publishing.service.gov.uk/media/67d9acaa594182179fe087d9/Table_P151__.ods ↩︎
100. Onward analysis of MHCLG statistics,  https://assets.publishing.service.gov.uk/media/67d9acaa594182179fe087d9/Table_P151__.ods ↩︎
101. Onward analysis of MHCLG statistics, Figure 8 data, https://www.gov.uk/government/statistics/planning-applications-in-england-april-to-june-2023/planning-applications-in-england-april-to-june-2023-statistical-release ↩︎
102. The original 1947 Act was replaced in 1990, see https://www.legislation.gov.uk/ukpga/1990/8 ↩︎
103. https://britishprogress.org/uk-day-one/reforming-judicial-review-to-get-britain-building ↩︎
104. https://britishprogress.org/reports/fixing-the-regulatory-state ↩︎
105. https://assets.publishing.service.gov.uk/media/67d2af5a886e7770c211e04b/Charts_Data_File.xlsx ↩︎
106. https://www.samdumitriu.com/p/britains-infrastructure-is-too-expensive ↩︎
107. https://www.bcg.com/united-kingdom/centre-for-growth/insights/reshaping-british-infrastructure-global-lessons-to-improve-project-delivery#:~:text=The%20average%20cost%20for%20a,overruns%20compared%20to%20peer%20countries ↩︎
108. Ibid ↩︎
109. Boston Consulting Group, Reshaping British Infrastructure: Global Lessons to Improve Project Delivery, 7 February 2024, ↩︎
110. https://bpconsulting.co.uk/uk-announced-as-the-highest-electricity-prices-in-europe/ ↩︎
111. https://www.ucl.ac.uk/news/2022/sep/electricity-prices-dictated-gas-producers-who-provide-less-half-uk-electricity?utm_source=chatgpt.com ↩︎
112. https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/articles/trendsinukimportsandexportsoffuels/2022-06-29#:~:text=3.,%C2%A31.3%20billion%20in%202020 ↩︎
113. Ibid ↩︎
114. https://www.neilobrien.co.uk/p/british-energy-policy-part-1-unilateral ↩︎
115. https://www.cia.org.uk/press-releases/chemical-industry-warns-current-cost-of-energy-is-barring-the-way-to-net-zero/1159.article?utm_source=chatgpt.com ↩︎
116. https://www.neilobrien.co.uk/p/british-energy-policy-part-1-unilateral ↩︎
117. https://www.cia.org.uk/press-releases/chemical-industry-warns-current-cost-of-energy-is-barring-the-way-to-net-zero/1159.article?utm_source=chatgpt.com ↩︎
118. https://www.ons.gov.uk/economy/economicoutputandproductivity/output/articles/theimpactofhigherenergycostsonukbusinesses/2021to2024 ↩︎
119. Ibid. ↩︎
120. Ibid. ↩︎
121. https://www.telegraph.co.uk/news/2025/05/19/starmers-brexit-reset-deal-read-the-full-text/ ↩︎
122. https://www.ons.gov.uk/economy/environmentalaccounts/articles/greenhousegasemissionsandtradeuk/2024 ↩︎
123. https://ourworldindata.org/energy-production-consumption ↩︎
124. https://www.ons.gov.uk/economy/environmentalaccounts/datasets/ukenvironmentalaccountstotalenergyconsumptionbyindustry ↩︎
125. https://www.gov.uk/government/statistical-data-sets/international-industrial-energy-prices ↩︎
126. https://ourworldindata.org/energy-production-consumption ↩︎
127. https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG ↩︎
128. See Rice and Timothy (2024), A Conservative Economy, Onward https://www.ukonward.com/reports/a-conservative-economy/ ↩︎
129. https://macrotrends.net/global-metrics/countries/DEU/germany/trade-gdp-ratio?utm_source=chatgpt.com ↩︎
130. https://unctad.org/news/china-rise-trade-titan#:~:text=As%20a%20result%2C%20China’s%20share,year%2C%20to%20about%20$710%20billion ↩︎
131. https://www.energypolicy.columbia.edu/publications/china-still-developing-country-and-why-it-matters-energy-and-climate/ ↩︎
132. See Pettis and Klein (2020), https://www.amazon.co.uk/Trade-Wars-Are-Class-International/dp/0300244177 ↩︎
133. https://www.imf.org/en/Blogs/Articles/2024/04/12/industrial-policy-is-back-but-the-bar-to-get-it-right-is-high ↩︎
134. 135.  World Bank, Trade (% GDP) – United Kingdom, ↩︎
135. https://unctadstat.unctad.org/datacentre/dataviewer/US.TradeMerchTotal ↩︎
136. https://carnegieendowment.org/research/2024/10/trade-intervention-for-freer-trade?lang=en ↩︎
137. https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/articles/understandingtheuksnetinternationalinvestmentposition/2020-04-27 ↩︎
138. See, inter alia, Pettis and Klein (2020), Trade Wars are Class Wars ↩︎
139. Ibid ↩︎
140. See Onward, https://www.ukonward.com/reports/pension-power/ ↩︎
141. https://www.oecd.org/content/dam/oecd/en/publications/reports/2018/06/inequalities-in-household-wealth-across-oecd-countries_a91f464f/7e1bf673-en.pdf ↩︎
142. https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2022 ↩︎
143. https://www.economicsobservatory.com/fiscal-and-current-account-deficits-what-threat-to-uk-economic-stability ↩︎
144. https://www.bankofengland.co.uk/-/media/boe/files/speech/2017/a-fine-balance.pdf?la=en&hash=7287F64BF073930762214C8F63723376310EF806 ↩︎
145. https://commonslibrary.parliament.uk/research-briefings/cbp-7857/ ↩︎
146. https://www.ons.gov.uk/peoplepopulationandcommunity/educationandchildcare/bulletins/educationenglandandwales/census2021 ↩︎
147. https://www.oecd.org/content/dam/oecd/en/publications/reports/2024/09/education-at-a-glance-2024-country-notes_532eb29d/united-kingdom_618cbed0/c3bad31e-en.pdf ↩︎
148. https://ifs.org.uk/news/increasing-concentration-high-skilled-jobs-london-means-graduates-elsewhere-cannot-fully ↩︎
149. https://www.resolutionfoundation.org/publications/are-universities-worth-it/#:~:text=The%20average%20income%20of%20a,for%20the%20average%20young%20graduate ↩︎
150. https://ifs.org.uk/publications/impact-undergraduate-degrees-lifetime-earnings#:~:text=The%20subject%20studied%20at%20university%20is%20hugely%20important.,almost%20universally%20achieve%20positive%20returns ↩︎
151. https://www.thetimes.com/uk/education/article/lowest-graduate-salaries-on-a-par-with-minimum-wage-rbzjwjjxl ↩︎
152. https://www.ons.gov.uk/news/news/oneinthreegraduatesovereducatedfortheircurrentrole ↩︎
153. https://www.if.org.uk/2024/01/17/the-state-of-the-graduate-premium/ ↩︎
154. https://www.timeshighereducation.com/opinion/uk-fails-students-not-facing-diminishing-graduate-returns ↩︎
155. https://commonslibrary.parliament.uk/research-briefings/sn01079/ ↩︎
156. 2020/21 is the earlies possible data when looking at a cohort which graduates 5 years ago ↩︎
157. https://taxpolicy.org.uk/2023/11/20/apology/ ↩︎
158. https://taxpolicy.org.uk/2023/11/20/apology/ ↩︎
159. https://www.britishchambers.org.uk/wp-content/uploads/2024/06/The_Open_University_Business_Barometer_2024.pdf ↩︎
160. https://www.fenews.co.uk/video/skills-shortage-costing-uk-stem-sector-1-5bn-a-year/?utm_source=chatgpt.com ↩︎
161. https://ckgroup.co.uk/stem-skills-gap-projected-to-cost-the-uk-120-billion-by-2030/?utm_source=chatgpt.com ↩︎
162. https://www.aldersgategroup.org.uk/publications/post/structural-barriers-to-apprenticeships-slowing-progress-on-green-skills/?utm_source=chatgpt.com ↩︎
163. https://feweek.co.uk/the-levy-isnt-working-could-labours-plans-fix-it/#:~:text=Apprenticeship%20starts%20have%20fallen%20by,issues%20as%20other%20higher%20education ↩︎
164. https://commonslibrary.parliament.uk/research-briefings/cbp-7951/#:~:text=The%20first%20three%20T%20Levels,be%20introduced%20in%20September%202025 ↩︎
165. Uses Department for Education Skills Survey data from 2022 (survey is conducted every 2 years with a gap during the COVID pandemic) ↩︎
166. https://fintiba.com/moving-to-germany/studying/university-system/ ↩︎

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