Going for growth: what can the turnaround sector tell us about challenges to UK growth?
As we move through 2025, the mantra of the UK government continues to be focused on growth, growth, growth. In...
As we move through 2025, the mantra of the UK government continues to be focused on growth, growth, growth. In this article The IFT looks at the key UK sectors where this growth is likely to come from, the barriers to growth across these sectors and how this aligns with underlying and ongoing challenges we see for businesses, where turnaround and transformation expertise can help.
There is a degree of consensus around key growth sectors in the UK. The previous Conservative Government highlighted five “growth sectors”: digital technology, green industries, life sciences, advanced manufacturing and creative industries. The current Labour Government have announced that their new Industrial Strategy (expected next month) will focus on eight key growth sectors, many of which overlap: advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences and professional and business services.
The key sector targets for growth in part reflect existing UK strengths and “comparative advantage”, in particular in financial and business services, as well as strong research and development capabilities.
The Government has announced its intentions to develop individual sector plans for each of these target sectors and in the meantime has early in 2025 announced separate measures it hopes will drive growth. These include measures to boost the “Oxford-Cambridge Growth Corridor” (known as the Oxford-Cambridge Arc under the previous administration) to help support some of the research and knowledge-intensive sectors identified above, the announcement of “AI Growth Zones” as part of implementing the AI Opportunities Action Plan, as well as more general policy programmes that they hope will boost growth across these sectors and the economy as a whole.
Flagship policies aimed at encouraging growth include various changes to the UK’s planning system to speed up approvals, in particular in relation to infrastructure projects and housebuilding via the Planning and Infrastructure Bill as well as measures seeking to boost private investment, and guide investment into strategic sectors via the National Wealth Fund and Office for Investment. Reforms to the UK pensions system including through the creation of new “pension mega-funds” aim to boost funding to UK business and industry from what is seen as a relatively untapped source. The creation of Skills England is in the Government’s words, “to bring together the fractured skills landscape and ensure that businesses have the right employees they need to grow”[1], whilst linking skills development with the industrial strategy. Recent measures in this regard include the announcement at the Spring Statement of a “construction skills package” Another key aspect of the Government’s approach to growing the economy is regarding regulation. The Regulation Action Plan set out in March commits to reducing the administrative costs of regulation on businesses by 25% by the end of the Parliament. Amongst other measures, the Chancellor has written to the UK’s main regulators to ask them to specifically outline how they will support growth in their approaches to regulation, and began a process of consolidation of regulators, for instance, by folding the Payments Systems Regulator into the Financial Conduct Authority. Finally, the Government has pressed forward with a number of international trade or economic deals -including with India, the United States and the European Union – it hopes will support UK trade and growth.
Nevertheless, the UK faces a number of challenges to achieve what the Government hopes to be the fastest sustained rate of growth of G7 economies. The Government’s “Invest 2035: the UK’s modern industrial strategy” consultation document identified some of the key challenges or “barriers” to investment and growth, including skills, data, access to finance, research and development, regulation, energy prices, planning and others.
Many of these challenges are highlighted in The IFT’s regular surveys of some of its key partner firms. For instance, the most common factors cited by businesses experiencing difficulties our partners have worked with include the depletion of working capital, costs of servicing debt, inflationary pressures and withdrawal of shareholder funding/support.
Together these highlight access to funding and finance as one of the key challenges for UK businesses both seeking to survive but also to grow and thrive. Businesses that are seeing their levels of liquidity continually stretched due to rising costs pressures may not have the cash ability to invest in growth. In addition, after a number of difficult economic years, the fact that many businesses are seeing traditional sources of funding such as existing shareholders becoming more difficult highlights the need for government policy to encourage additional and new forms of investment. Whether such investment can reach particular businesses, such as SMEs or viable yet stressed businesses, to encourage broadly distributed growth, will be a key challenge.
Announcements by the government confirm that the National Wealth Fund and the Office for Investment will work with local and regional partners to funnel investment into different regions – also via the Business Growth Service launching later in 2025 – and the government has also opened a call for evidence looking specifically at access to debt finance for SMEs. However, there is also a question about the capacity within businesses to take advantage of new opportunities. IFT quarterly updates and the findings of our annual impact survey highlight both Board/management fatigue in distressed businesses, as well as high levels of distress in certain key sectors, in particular construction, which as a sector underpins growth plans for the key growth sectors in terms of infrastructure development.
In IFT quarterly surveys over the past year, construction has been featured as a sector in which IFT partner firms are seeing a fairly high degree of turnaround and restructuring support being sought, which is a positive indicator for businesses seeking to stabilise their position. The IFT’s annual impact survey of its independent members highlighted again in 2024 that a high proportion of our members have, as well as supporting businesses with short-term financial pressures, also focused on longer-term transformation and supporting Boards to implement strategic change. Creating the space within a business for innovation, improved cash management and productivity is part of supporting growth in the longer term and The IFT will be in the coming months releasing a report that discusses in more detail the work of IFT experts in supporting operational transformation to deliver business value and growth.
