How can the Industrial Strategy be used to unlock regional prosperity?
The UK’s new Industrial Strategy sets bold goals for growth in communities across the UK. But, facing tight public finances and even tighter politics, Negotient’s James Dowling says that success requires bespoke, negotiated local deals.
The Industrial Strategy created 22 new Industrial Strategy Zones, aiming to catalyse growth from Teesside to the West Midlands. But success depends on more than designating zones or announcing funds—it requires creative, negotiated cluster deals that align national priorities with local strengths and private investment.
This approach is in everyone’s interest. Whitehall needs local projects to succeed for its national goals (from net zero to NHS reform) and local leaders need Whitehall’s backing to secure the big investments that create local prosperity.
Historically, connecting these dots has been hard. Too often, the relationship between central government, local government and business has been transactional and short-term. Whitehall doles out grants or enterprise zones; towns compete for one-off investments; companies lobby for incentives—but there’s no lasting partnership.
Today’s political leaders have no choice but to change the way they do things if they are to get results. Central and local governments are confronting tight public finances born of nearly 20 years of no growth, with the traditional responses—increasing tax or borrowing more—largely closed through a loss of market and political confidence. The response needs to be more creative—and more collaborative. Succeeding against the ambitions of the Industrial Strategy requires negotiated approaches—something akin to “city deals” on steroids. In essence, for each priority sector and region we should be asking: what deal can we strike that genuinely benefits both the public and private side? That means moving beyond standard funding bids towards bespoke cluster deals where each stakeholder commits something and shares in the gains.
What is a cluster deal?
Think of it as a comprehensive growth pact focused on a specific local industry cluster. It typically involves:
a major private investment (an anchor company or consortium agreeing to set up or expand facilities in the area);
a package of public support and policy measures (from central government incentives to local infrastructure and skills programmes) to enable that investment; and
a framework of mutual commitments that tie everyone together for the long haul.
Crucially, this is a hard-headed negotiation where each side gets something it needs: businesses get certainty and a favourable environment to invest, while governments get jobs, upskilling and progress towards strategic goals.
How might this work?
We have considered how this might work in two highly politically salient areas.
Firstly, building on existing deals in Teesside, Mayor Ben Houchen could aim to achieve a Green Manufacturing Cluster Deal in Teesside. This is an area with deep industrial roots and new opportunities in clean energy. A cluster deal might bring together a consortium of offshore wind manufacturers and hydrogen producers who are prepared to invest, say, £1 billion in new factories at the Tees docks. In return, central government offers a tailored incentive package: upgraded port infrastructure, fast-track planning approval, and maybe guaranteed contracts (via the CfD renewable scheme) to buy the green products made there. The Tees Valley authorities could sweeten the deal by assembling derelict land for the investors and launching a local skills academy to train welders, turbine technicians, and hydrogen engineers. The companies, for their part, would commit to hiring locally and sharing some of their innovations with Teesside’s new Net Zero research centre. The outcome? Teesside becomes a thriving hub for the green economy, employing thousands in well-paid jobs and helping the UK hit its renewable energy targets—all through a negotiated set of commitments rather than piecemeal grants.
Or consider a Life Sciences Cluster Deal in the “Golden Triangle” (Oxford–Cambridge–London). The UK leads in biomedical research, but has never unlocked the full economic benefits, lagging competitors in manufacturing, clinical trials and uptake of innovation. A deal here could see government and local partners working with a major pharmaceutical firm to build a state-of-the-art vaccine manufacturing campus outside Oxford. The firm invests hundreds of millions, funds PhD places and research programmes, commits to run clinical trials with the NHS, and to base intellectual property and production in the UK for 10-20 years. In return the government provides capital co-funding and commits to streamlined regulatory approval and NHS market access for the resulting vaccines. The local councils help by streamlining planning and providing affordable housing for incoming scientists. The university trains a pipeline of biotech graduates. This kind of deal secures a strategic industry onshore, boosts exports, and reinforces Britain’s reputation as a life sciences powerhouse – while the company benefits from a supportive ecosystem and a dependable home market.
These examples share a common thread: each requires flexibility and “give-and-take” from all sides. They’re complex undertakings—far more so than traditional investment promotion—but the payoff is a cluster that is more than the sum of its parts. So, how can we make such deals happen systematically?
Central government needs to empower local deal-making
The new Industrial Strategy acknowledges this by shifting to Industrial Strategy Zones and hinting at enhanced mayoral powers. But Whitehall must also change its mindset: from controlling purse strings in silos to enabling integrated deals. That means giving local leaders the ability to package different funding streams and policy levers creatively. It also means being open to new finance models—for instance, co-investing alongside private investors or sharing future tax revenues—when a deal’s benefits justify it. Officials will have to negotiate across departmental boundaries (e.g. transport, skills, planning) as one team. This is unfamiliar territory, but reflects the mission-led approach that Labour has instructed civil service leaders to grip. As one former minister observed, siloed, inflexible negotiations in the past often “failed both sides”. Whitehall should take that lesson to heart in the regional growth context.
Local leaders must step up as deal-makers
Councils and mayors should identify their region’s most promising sector and proactively court partners. Start by convening the key players locally—employers, universities, investors—to define a common vision (be it a hydrogen hub, digital media cluster, aerospace corridor, etc.). Then take that vision to Westminster and potential investors in the spirit of partnership: “Here’s what we can offer, here’s what we need from you.” The best local leaders (for example, Ben Houchen in Teesside; Andy Burnham in Manchester) are already doing this, serving as chief negotiators for their region’s future. Others should follow suit, assembling skilled teams that understand government processes, business incentives, and effective negotiation approaches that yield results. The truth is central government has dozens of priorities competing for its attention; a well-prepared local pitch can capture attention and resources if it aligns with national goals and shows a credible delivery plan.
All parties should insist on value for mutual benefit, not just lowest cost
A deal only works if it’s sustainable for everyone involved. That means designing agreements that share benefits fairly and anticipate future changes. For example, if public land is given on favourable terms to a company, build in profit-sharing or claw-back clauses in case the company later sells it at a windfall profit. If a company is committing to a region, government support can scale up over time as hiring targets are met (pay for performance rather than an upfront blank cheque). These kinds of conditions ensure that each side is incentivised to stick with the deal for the long run. They also provide political cover: local leaders can show taxpayers that safeguards are in place, and businesses can reassure shareholders that they have predictability. We should be aiming for relationships and deals that stand the test of time, not quick wins that unravel in a few years.
Creativity and flexibility must become the norm in negotiations
Every region is different; every industry is different. The detail of each cluster deal will vary—and that’s a good thing. A cookie-cutter approach from Whitehall won’t maximize local potential. Instead, central government should set broad parameters (e.g. “we’re willing to offer tax incentives up to X for projects that deliver Y jobs or Z CO2 reduction”) and let local dealmakers mix and match tools to craft tailor-made solutions. Equally, companies should come to the table not just with demands, but with ideas—maybe offering to collaborate with local colleges on curricula, or to open their facilities for community use, if that helps secure local support. In short, negotiation should be seen not as a battle but as a design session: designing a deal that works for the economy, the public, and the investors.
The old attitude—government fixating on lowest cost, business focusing on narrow self-interest—leaves everyone worse off. By contrast, an open, innovative negotiation can unlock arrangements no one initially thought possible.
If we want real growth, government dealmakers must stop chasing short-term bargains and start crafting bold, balanced deals which are built to last. Cluster deals aren’t just policy—they are a mindset shift which sees negotiation not as a tug-of-war, but as a blueprint for shared success. And given the extremely tight fiscal circumstances, there is no other choice: regions that embrace this will shape the future; the rest will watch it happen.