Unpacking the UK’s AI-friendly Modern Industrial Strategy

• The UK’s new industrial strategy has six “frontier technologies”, including AI, cyber security and quantum
• Businesses and investors to be supported by “the certainty and stability needed for long-term decisions”
• One aim is “to secure the UK’s first trillion-dollar technology business”

During 2025, British AI companies raised £7.7bn between them in equity investments, according to London, UK-based Beauhurst Insights. To put that figure in perspective, it equates to 32% of all the UK equity capital deployed over the entire year. AI’s performance has been quite remarkable, but then so too has that of other technology sectors, including robotics and automation. 

According to a recent report from the research firm, investment volumes in robotics and automation rose by 44% last year compared with the average of the previous three years. In advanced manufacturing, the value of investment deals rose by 87%. 

As we have previously reported, UK academia is playing a key role in providing the foundations for innovation and future growth in AI-related developments – see How UK universities are spinning out commercial tech innovators and UK academia enters new era of tech spin-outs.

But such efforts cannot be successful in isolation – they require support from central government. So it’s positive for the UK that investment and university spin-out trends chime surprisingly melodiously with the UK government’s Modern Industrial Strategy that became official policy in the summer of last year. It is a detailed 10-year plan to boost business investment and nurture and expand the “industries of the future in the UK”.

The government’s intent is to make it quicker and easier for businesses to invest whilst providing “the certainty and stability needed for long-term investment decisions”. To that end, the money from the Security Strategic Investment Fund, the British Business Bank and National Wealth Fund will be used to “build our domestic skills pipeline” whilst, “we will tackle critical barriers in digital and energy infrastructure and adopt pro-innovation regulation through the new Regulatory Innovation Office”. 

The Beauhurst report observes that the UK government’s strategy “reflects a broader reorientation toward physical infrastructure, supply chain resilience, and the industrial hardware required to actually deploy AI in the real world.” It adds: “These include the robots, sensors, components and production lines that translate algorithmic ambition into tangible output”. 

It also reminds readers that the government’s strategic ambitions “have long centred on a twin bet: Digital leadership and industrial renewal”, and claims that “the 2025 data suggests the equity market is, quietly, making the same wager.” 

Given the figures, that reads like a text-book example of a typical British understatement.

The fact is that in the body of the 74-page-long Modern Industrial Strategy (MIS) document itself, the UK government makes plain that its vision is for the UK “to be one of the top three places in the world to create, invest in and scale-up a fast-growing technology business” by 2035.

Furthermore, in a statement bereft of false modesty and stiff-upper-lip reticence but perhaps with more than a soupçon of wishful thinking, the document adds: “We will aim to secure the UK’s first trillion-dollar technology business.” 

However, as the old saying has it, “there’s many a slip ‘twixt the cup and the lip” and the MIS gives no timeline by which a British trillion-dollar technology business might actually become a reality.

The MIS document adds: “We will take a whole-of-government approach to delivering this vision, reforming the business environment for digital and technology businesses and fully deploying all the levers of government aligned with the Science and Technology Framework (STF).” 

The STF was first published in March 2023 by the UK’s Department for Science, Innovation and Technology (DSIT). It is based on a strategic, 10-point plan to make the UK “a global science and technology superpower” and engenders a cross-government approach to investing in the key areas of AI, engineering telecoms, quantum and semiconductors. Thus, the Modern Industrial Strategy will focus on business investments in those sectors and, to that end, has announced that it will make £2.6bn of public money available to them by 2029-30 to spend on commercial R&D. 

New strategy prioritises six ‘frontier technologies’ 

The strategy prioritises a select set of “frontier technologies” that, the authorities determine, have the most significant growth potential for the country whilst also paying due cognisance to the ever-increasing importance of the UK’s strategic security and sovereignty. The government says it has “engaged widely with business, academia and other stakeholders to develop action plans for six frontier technologies.”

The first is Advanced Connectivity Technologies (ACT), wherein the UK’s impressive research base will “support greater domestic commercialisation of ACT and promote UK technology internationally.” ACT will be applied “in line with our values” and “develop the technologies through R&D, scale-up support  and deploy them to deliver connectivity benefits to people and businesses. We will concentrate on defence, transport and future telecoms networks, including satellites.”

The second is AI. Under the aegis of the AI Opportunities Action Plan, the government plans to ramp up domestic capability and establish new AI Growth Zones. These are strategic government-backed hubs designed to unlock large-scale datacentre capacity and accelerate grid connections while lowering and simplifying planning barriers. The intent is for the zones to be established across the UK to attract in excess of £28bn in private investment, create more than 15,000 new jobs and drive targeted clean energy initiatives.

The third frontier technology is cyber security. Here, the government will apply the provisions of the UK’s Cyber Security and Resilience Bill that has been wending its leisurely way through both the House of Commons and the House of Lords since mid-November 2025 and might become law sometime later this year or early 2027. 

Of equal importance to the cyber security considerations of the UK’s critical national infrastructure and digital services are the Network and Information Systems (NIS) Regulations of 2018 and 2024-26, whereby organisations and companies in specified critical sectors have statutory cyber security responsibilities. The sectors are energy, transport, health, drinking water, digital infrastructure and some digital services (online marketplaces, search engines, and cloud computing services). Each sector has a regulator (“competent authority”) responsible for “guidance, monitoring and enforcement”.

The fourth frontier technology is engineering biology and its associated applications and processes. In practice, according to a Digital and Technologies action plan document, that means “constructing an innovation ecosystem to deliver growth by addressing the scale-up challenge through a new infrastructure fund, implementing an ambitious R&D programme, driving innovation by tackling regulatory barriers to enable routes to market for new products, and enhancing capabilities and resilience in key areas of the domestic value chain”. 

Quantum technologies is the fifth area of focus. The plan is to accelerate technology development and implementation “by building and upgrading scale-up infrastructure”, and driving adoption through “a mission-led approach, which establishes clear government demand signals and generates a pipeline of early quantum adopters, defence and healthcare.” 

Last but not least is semiconductors, with the development of a “strategic and joined-up approach to R&D” whilst boosting the innovation ecosystem to improve commercialisation. The UK government’s plans will prioritise areas with high-growth potential and “wide-ranging cross-sector applications”. Emphasis will also be on national security, the strengthening of the resilience of the semiconductor supply chain and international collaboration, positioning the UK as “a reliable, trusted partner in the global semiconductor ecosystem”.

Technologies related to the advanced manufacturing, clean energy, defence and the life science sectors are excluded from the Modern Industrial Strategy as they are covered in separate sector plans.

Interestingly, and pertinently, HSBC Bank’s recent Tech Nation Report 2026, highlights this year as “a defining moment for the UK’s AI ecosystem”. Emily Turner, CEO at HSBC Innovation Banking UK, noted: “AI is now becoming the core driver of transformation across every industry, with record investment, and the UK is at the centre of this innovation. To sustain this momentum and continue to lead globally, continued focus on talent, late-stage capital and expansion of both regional hubs and sector-specific AI development, will be crucial.“

The government seems to agree.

– Martyn Warwick, Editor in Chief, TelecomTV