Manufacturing still vital to UK’s future, says innovation report

The new UK Innovation Report 2025 from Cambridge Industrial Innovation Policy (CIIP) highlights that the UK is at a defining moment for its industrial competitiveness and manufacturing, although in decline, is still vital to the future.

The report is intended to provide a critical analysis of the innovation landscape, benchmarking the UK’s industrial sectors against global competitors.

The report presents evidence regarding the country’s industrial strengths, challenges, and opportunities and offers an overview of the competitive position of major UK manufacturing sectors over the past decade, comparing their economic and innovation performance against those of other leading economies.

The report was published ahead of the Chancellor’s Spring Review but CIIP says this is a particularly significant moment, as the UK government has placed industrial strategy at the core of its growth agenda, with a stress on investment, technology adoption, and high-growth sectors. 

CIIP says the past year has also underscored the growing need for evidence-based industrial and innovation policymaking. “Recent public consultations on industrial strategy, scale-up financing, and technology adoption highlighted the renewed need to enhance the evidence base available to policymakers”, they say. The Innovation Report offers new data, analyses, and perspectives to support evidence-based policy development.

Report co-author CIIP’s Dr. Carlos López-Gómez said:“What the UK Innovation Report offers is a clear, accessible resource that helps cut through some of the noise and connect the dots between the vast amount of data found in multiple national and international databases. Ultimately, we want this report to be more than just a set of statistics – we want it to be a tool for national dialogue that helps inform industrial and innovation strategies.”

The top messages from the report include that the UK is a leader in government support for business R&D and a leading innovator in renewable energy technologies.The industrial workforce is high in tertiary educational attainment, but there are said to be persistent qualification and skills mismatches.

Worryingly, the UK’s share of global manufacturing value added fell from 3.1% in 2000 to 1.9% in 2022, while its share of global manufacturing exports more than halved, dropping from 3.7% to 1.5%. More concerning is the UK’s loss of competitiveness in high-value-added industries. Over the past decade, the most significant declines in global export shares have occurred in historically strong sectors, including pharmaceuticals and other transport equipment, which covers aerospace, shipbuilding, and railway equipment. Additionally, the UK’s global market share in advanced industries fell from 4.4% in 2000 to 2.6% in 2020.

Dr. López-Gómez said:“Reversing the decline in the competitive position of UK industries must be at the heart of the Industrial Strategy. Growing competitive pressures should reinforce the sense of urgency while highlighting that the Industrial Strategy presents a historic opportunity to rebuild the strength of UK industries.”

The report finds evidence of the ‘critical role of manufacturing in raising the UK’s economic productivity’. Manufacturing is found to stand out as one of the sectors with the fastest productivity growth, with notable productivity gains in transport equipment, machinery, metal products, and automotive between 2010 and 2022.

Manufacturing’s wider impact on the UK economy is said to some 15% of UK value added and employment, as against  official statistics showing that manufacturing accounted for 9.1% of the value added and 7.2% of the employment in 2023.