Analyst Urges UK to Adopt Developing Nation Strategies for Industrial Revival

2026-02-05 global

London, Thursday, 5 February 2026.
Prominent analysis suggests Prime Minister Starmer must abandon developed-market orthodoxy. To reverse industrial decline, Britain is advised to adopt the aggressive state-led planning typical of developing nations like China.

Reevaluating the Industrial Blueprint

The call for a radical shift in economic strategy comes just days after Prime Minister Keir Starmer’s visit to China on January 29, 2026 [1]. Guardian columnist Larry Elliott argues that for Britain to reverse decades of industrial decline, it must view the world through the prism of a developing nation rather than a developed one [1]. This analysis posits that the UK’s service-dominated economy—where services account for approximately 80% of activity—is structurally unbalanced [1]. To rectify this, experts suggest the government must emulate the aggressive, state-led industrial planning utilized by nations like China, which successfully transitioned from a peasant economy to a manufacturing powerhouse over the last half-century [1]. Elliott contends that raising manufacturing’s share of the Gross Domestic Product (GDP) from its current level of 8% to 10% would represent a significant achievement, requiring a “colossal effort” potentially involving a dedicated economic ministry and protectionist measures such as domestic component stipulations [1].

Current Indicators and Market Sentiment

While the debate over long-term strategy intensifies, immediate economic data offers a mixed but cautiously optimistic picture. As of February 2, 2026, the S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) rose to 51.8 in January, up from 50.6 in December 2025 [2][4]. This reading, the highest since August 2024, signals expansion in the sector [2][4]. Notably, export sales to the United States and China increased for the first time in four years, driving output growth for the fourth consecutive month [2]. However, this growth is juxtaposed against persistent labor market fragility; staffing levels in the sector were reduced for the 15th consecutive month in January, although the rate of job cuts has slowed [4]. Industry leaders note that while business confidence has rebounded to pre-Autumn Budget 2024 levels, cost-cutting measures are unfortunately favoring job losses [4].

Legislative Focus and Technological Integration

To sustain this nascent recovery, policymakers are focusing on stabilizing the regulatory environment and fostering technological adoption. The Business and Trade Committee published a report on February 3, 2026, outlining priority workstreams for the year, including the delivery of the Industrial Strategy and the scrutiny of inward investment [7]. A critical component of this strategy involves Artificial Intelligence (AI); in 2024 alone, total AI estimated revenue in the UK surged by 68% to £23.9 billion [7]. Concurrently, digital transformation initiatives are yielding tangible results. Programs like Made Smarter Yorkshire and Humber have helped manufacturers unlock £3.7 million in digital transformation activity through grants and private investment [5]. Practical applications of this technology, such as automated canning lines, have allowed individual businesses to increase output by as much as 150% [5].

The Confidence Gap and Future Outlook

Despite positive indicators, the sector faces significant headwinds regarding investment confidence. Industry body Make UK has set an ambitious target to increase manufacturing’s share of UK GDP to 15%, a move they calculate would add £142 billion to the economy [6]. However, manufacturers continue to grapple with high energy prices—industrial electricity prices in 2025 were significantly higher than those in Europe and the US—and supply chain volatility [3]. The consensus among industry stakeholders is that confidence is “the currency of investment,” and without a predictable policy framework and credible energy strategies, the UK risks falling further behind competitors like Ireland and Poland [3]. As the government moves to implement its Industrial Strategy throughout 2026, the challenge will be balancing immediate cost pressures with the bold, interventionist reforms necessary to rebuild the nation’s industrial base [6][7].

Sources

UK Economy Industrial Policy