The government’s industrial strategy is overlooking logistics

The government has identified eight high-growth industries for priority support but they all depend on the industrial logistics sector, says James Craddock

The industrial strategy green paper is a welcome declaration of intent from the government to drive productivity and economic growth over the next decade. It also offers a crucial opportunity for businesses to voice the long-term policy and fiscal changes needed to help grow the economy. 

The government has identified eight high-growth industries for priority focus: advanced manufacturing, clean energy, defence, life sciences, creative industries, digital services, finance, and professional services.

These are all important sectors to the economy, but if we’re talking about a sector that excels in the UK, then one might ask why the industrial and logistics (I&L) sector isn’t included? After all, it employs 4.5m people in the UK, generates £268bn annually in GVA, and job growth in the sector has outpaced the broader economy by 27 per cent compared to 10 per cent. Furthermore, logistics jobs pay 9 per cent more than the average across all sectors.

The industrial and logistics sector employs 4.5m people in the UK, generates £268bn annually in GVA, and job growth in the sector has outpaced the broader economy by 27 per cent compared to 10 per cent

Yet it may come as a surprise that, as one of Europe’s largest industrial and logistics developers, we are not suggesting it should simply be classified alongside the other high-growth sectors the strategy identifies. What we are saying is that the I&L sector must be recognised as one of the ‘foundational sectors’ that are so critical to underpinning the success of the strategy. 

The draft National Planning Policy Framework, published earlier this year, rightly acknowledged the crucial role industrial, freight and logistics space plays in supporting the UK’s supply chains and digital infrastructure. Likewise, the industrial strategy must recognise that five of the eight high-growth sectors rely on industrial warehouse space and all eight depend on logistics and data centres, which operate from industrial buildings. As such, the success of these industries is inextricably linked to a thriving I&L sector, which in turn requires a policy framework that supports continued investment and growth.

Misconceptions about industrial and logistics

There remains a misconception that the I&L sector primarily serves retail and distribution, which are certainly important. But today’s I&L buildings are modern, tech-enabled spaces with large, adaptable industrial floorplates, designed to meet the specific needs of occupiers. They offer the flexibility to accommodate robotics, automation and other specialist high-tech equipment, and are strategically located near transport corridors with easy access to labour. These spaces are just as suitable for advanced manufacturing and defence as they are for creative industries and life sciences. Moreover, the industrial ‘shells’ that house data centres are vital to providing the digital infrastructure every modern industry depends on, which is a need that will only increase as AI becomes more integrated into daily life.

Our existing customer base already demonstrates the diverse application of I&L space across high-growth sectors. From established brands like Rolls-Royce and Brompton Bicycles, to sector leaders like Ultra Maritime, a specialist in mission critical and intelligent defence systems, UCB, an expert in neurological and autoimmune disease, and award-winning creative studio, RD Content, these firms rely on I&L space to drive their success.

As a long-term investor in the UK and Europe, we are well-positioned to assess how the UK economy fares against its international counterparts.

One of the key challenges the Industrial Strategy seeks to address is the UK’s stagnant productivity. Despite our leadership in science, innovation, and research and development, the UK’s productivity has barely improved since the financial crisis, with only Portugal, Poland, and Spain reporting lower output per capita in Europe. This is in spite of the UK ranking fifth in the Global Innovation Index and being a global leader in academic excellence and entrepreneurship.

A closer look at company birth and death rates may explain this disparity. The UK ranks second in the Global Start-Up Ecosystem Index, with a company birth rate well above the European average. But it also has an unusually high company failure rate. Since 2022, company closures have outpaced new business formation, leading to a net loss of companies. This suggests that while the UK excels at creating new businesses, it lacks an environment that nurtures their long-term growth.

By fostering a policy environment that removes barriers and encourages investment in modern, sustainable industrial and logistics space, we can provide the infrastructure that high-growth companies need to thrive

A robust I&L sector is one of the essential pillars to solving this issue. By fostering a policy environment that removes barriers and encourages investment in modern, sustainable industrial and logistics space, we can provide the infrastructure that high-growth companies need to thrive.

The UK needs a clear industrial strategy, with industrial and logistics at its core as a foundational sector. The green paper is a step in the right direction, but we urge the government and regional mayors to take a more strategic approach to allocating I&L land, which is critical to enhancing productivity, decarbonising supply chains, and securing access to the energy infrastructure these high-growth businesses need to power the nation’s future growth.

James Craddock is UK managing director of Segro