Advanced persuasively in recent articles1 by Joseph Ward, Bradley Ward and Peter Kerr, the concept of ‘power without capacity’2 explains the seemingly contradictory development of the British state in recent decades, in which power over decision-making is increasingly hoarded at the centre, but the capacity to deliver upon those decisions through policy has been progressively eroded and undermined. A similar argument has recently been articulated by David Richards and his fellow authors who argue that the British state is increasingly ‘incoherent’,3 the centralising traditions of the British Political Tradition incompatible with the fragmented governance landscape that has developed over recent decades. The Economist recently described state capacity (and the lack thereof) as the ‘issue of the age’4.
This policy brief is the first of three that will examine the prospects for industrial strategy in Britain. Using the notion of ‘power without capacity’ as a foundational concept, this brief argues that Britain appears to no longer have the capacity to either design or deliver the distinctive industrial strategy necessary to reinvigorate the British economy. This is unfortunate because recent years have seen British governments seemingly recover their appetite for industrial strategy, an economic policy with the potential to tackle long-standing weaknesses in the British economy, such as stagnating economic growth and anaemic productivity, thereby delivering much-needed improvements to the living standards of the British people.
Britain’s loss of capacity to design effective industrial strategy is intimately linked with the depoliticisation5 of its economy beginning in the mid-1970s, a process that brought crashing to a halt the creeping politicisation6 of the post-war era through economic policies. The sweeping privatisation agenda of the 1980s saw a significant transfer of industry from the state (via an arms-length model of nationalisation) to the market. Public monopolies in the utilities sector were passed into the hands of new private owners, with executive agencies (quangos) introduced in a forlorn attempt to artificially inject competition into their operation. Outsourcing and public-private partnerships further diminished the role of the British state in the delivery of public services and national infrastructure. All this denuded the ability of the British state to directly affect the British economy, the power of the British state instead relegated to indirect impact through the establishment of rules and norms enforced by Britain’s regulatory apparatus7.
“Power over decision-making is increasingly hoarded at the centre, but the capacity to deliver upon those decisions through policy has been progressively eroded and undermined.”
John Denham and I identified much of this in our recent article8 in Renewal where we argued that Britain needs to move beyond ‘the assumptions of a globalising economy’ that the private sector will every time and everywhere deliver economic outcomes efficiently and effectively. Doing so requires Britain to build a ‘sophisticated state’ that ‘understands how the private sector will respond to policy’. The privatisation agenda of the 1980s brought with it the diminishment of the Department of Industry, with several governments of recent decades declining to have a government department dedicated to industry (or industrial strategy) at all, preferring instead a more generalised Department for Business that has often exuded a strong preference for market-based economic solutions. The result has been to leave the British state bereft of civil servants with the necessary skills, knowledge and experience to design an effective industrial strategy to which the private sector will respond, a phenomenon exacerbated by the increasing recent predilection for use of consultants in the formulation of policy9. As John Denham wrote in our article in Renewal, ‘the ability to understand, work with, and shape the private sector has not been a valued civil service skill for a generation, while the promotion of rentierism – the transfer of public and taxpayer wealth into private hands – has been built into officials’ assumptions’.
This has all occurred at a moment in British politics when governments have seemingly rediscovered industrial strategy. Having promised on the campaign trail to implement an industrial strategy to ‘get the whole economy firing’, the Conservative government under Theresa May subsequently published an industrial strategy in 201710, supplementing it with new institutional formation within the British state including the creation of a Department for Business, Energy and Industrial Strategy (BEIS) and the Industrial Strategy Council. After an apparent abeyance under the Conservative governments ofBoris Johnson and Rishi Sunak11, the resurrection of industrial strategy as a legitimate and credible economic policy appears complete under the Labour government of Kier Starmer, who published their own industrial strategy in 202512.
The oft-repeated narrative articulated in the preceding paragraph always requires context and nuance13. Whilst recent decades have seen British governments shy away from the publication of a formal industrial strategy, they have implemented industrial policies in abundance. An example highlighted in my own scholarship with Richard Woodward14 is that of the Conservative governments of Margaret Thatcher, who despite rhetoric that portrayed industrial policy as an economic heresy, quietly intervened to target many economic sectors for favourable and preferential treatment, disguising industrial policy under alternative nomenclature and strewing it across government departments beyond its traditional home in the Department of Trade and Industry. As Vince Cable astutely identified in a speech in 2012, all British governments have an industrial strategy whether ‘explicit or not’ via the decisions it makes each day about ‘skills and universities, on research, on technologies, and on infrastructure’ noting that Britain has ‘an industrial strategy by default or design’15.
The British state is bereft of civil servants with the necessary skills, knowledge and experience to design an effective industrial strategy to which the private sector will respond.
Herein lies the problem because whilst the industrial strategy of Theresa May and Kier Starmer illustrate some novel features (e.g., grand challenges, the industrial strategy partnership with France), at their core are distinctive continuities, both adopting an overwhelmingly sectoral approach to industrial strategy identifying a consistent set of economic sectors to benefit from continued largesse by the state. Indeed, the eight industrial sectors identified in Labour’s recent industrial strategy as ‘key’ (the so-called IS-8 of advanced manufacturing, clean energy, creative industries, digital technologies, financial services, life sciences, and professional and business services) are the same internationally-traded sectors of the British economy that have been supported by British governments via beneficent industrial policies for decades if not centuries16. Defence and advanced manufacturing industries, for instance, have benefitted from long-standing intervention by the British state, and financial services have been at the heart of the British economic growth model since the Glorious Revolution in 1688!17 Elsewhere, support for the creative industries18 can be traced to the Cinematograph Film Act 1927, and clean energy to the 1973 Oil Crisis that spawned the New Renewable Energy Programme subsidising investment into R&D19. There are good reasons why some of these industries might be supported beyond economic rationale, not least the provision of public goods (e.g., culture, clean energy), but to expect an industrial strategy delivering ‘more of the same’ to engineer Britain’s economic re-birth, arresting and reversing stagnating economic growth and perennial cost-of-living crises, is fanciful at best.
Why such persistent continuity in industrial strategy (similar policies supporting the same perpetual cast of economic sectors) has been pursued raises important questions about the nature of the British state, especially for those us interested in creating a new and more equitable economic growth model. One answer might be the lack of historical awareness on the part of politicians and civil servants about industrial strategy. The view that industrial strategy has seen only a recent resurgence in British economic policy, particularly with the rise to power of Theresa May, is strong, as is its association with high-profile failures of the 1960s and 1970s (the successes conveniently hidden from view). Whilst faulty historicization undoubtably plays its role in the strong continuities evidenced in British industrial strategy, a more persuasive argument probably lies in the foundational concept of this policy brief, that the British state offers ‘power without capacity’. Having lost its capacity to deliver industrial strategy, the British state has also lost the knowledge and skills necessary to design industrial strategy, injecting a powerful impetus towards continuity in approach evident in the industrial strategy developed by the Conservative government of Theresa May, and the Labour government of Kier Starmer.
UK governments have seemingly rediscovered industrial strategy since Theresa May’s 2017 white paper, and after an apparent abeyance under Johnson and Sunak, its resurrection as a legitimate and credible economic policy now appears complete.
In the context of weak policy design, and declining economic performance more generally, British politicians seem to increasingly resort to bombastic statements when discussing industry. Take, as an illustrative example, repeated exhortations by British Prime Ministers regarding the prospect of Britain becoming an AI Superpower. This outlandish objective is simply unrealistic given Britain’s weak industrial base, and an economic model that encourages merger and acquisition with international capital as the primary method of extracting economic value. It is even more unlikely in the context of Britain’s failure to develop an appropriate industrial strategy for the sector. The suggestion that Britain will become an AI superpower via the recently signed Technology Partnership Deal, an agreement that seems to take at face value that capital investment into UK AI-companies is in the national interest, is extremely questionable20. Rather than enabling Britain to become a superpower in AI, this deals risks Britain becoming dependent for AI on foreign companies and their expertise, when we should be developing our own national champions and native skills in AI that in turn could lead to a generational shift in the abilities and aspirations of the British people. Even Nick Clegg, erstwhile employee of Facebook, has argued the Technology Partnership Deal will worsen and not improve Britain’s strategic dependence on US technology giants. It might be better were Britain to identify niches within AI where it does have competitive advantages, and work to cement for Britain an early position with future AI global supply chains. But such a strategy would require a sophisticated state, and this would require significant political capital and resources expended to rebuild the British state and its capacity.
It might be better were Britain to identify niches within AI where it does have competitive advantages, and work to cement for Britain an early position with future AI global supply chains.
There has been some belated recognition of these problems by the Labour government, with Liz Kendall (Secretary of State for Science, Innovation and Technology) making a speech21 in April 2026 with AI framed as ‘the defining currency of the age’ and the future ‘engine of economic and hard power’ requiring Britain to achieve ‘AI sovereignty’. To achieve this Kendall articulated a nascent industrial strategy for the sector that would see Britain ‘use the best technology and welcome inward investment’ whilst ‘reducing…. dependencies and increasing resilience in key national strategic priorities.’ According to Kendall, this would require a twin shift in the current approach: a ‘decisive move towards backing more British AI companies, especially in areas we have real strengths’ and ‘by working more closely with our international partners, particularly other so-called middle nation powers.
Despite this interesting rhetoric, articulating a potentially innovative path for AI industrial strategy, drilling into the detail of the speech reveals some depressing continuities. For instance, financial backing for Sovereign AI, the mechanism for helping British AI companies, was limited to just £500m, an astonishingly small amount for an industry touted by Kendall as ‘the currency of the future’ and a technology that will ‘lead the race to cure diseases, discover new materials and create trillion dollar companies’. Targets for British AI seem rooted less in building ‘national resilience’ than with more traditional objectives around competition and building an internationally traded sector to secure share in world markets. Plus ça change.
1. ‘Whither the Centre? Tracing Centralisation and Fragmentation in UK Politics’, Joseph Ward, Bradley Ward, and Peter Kerr, Political Studies Review 2025, Vol. 23, issue 2, 445–460.
2. ‘Playing to the gallery? From performative to techno-statecraft in the age of power without capacity’, Bradley Ward, Joseph Ward & Peter Kerr, Public Money & Management, 24 November 2025.
3. ‘Crisis what crisis?’ Understanding the recurring problems of the British state, The British Journal of Politics and International Relations 2025, Vol. 27(2) 462–476.
4. ‘State capacity is the issue of the age’, the Economist, 8 January 2026.
5. ‘New Labour and the politics of depoliticization’, The British Journal of Politics & International Relations, 3: 127-149.
6. ‘The Politicisation of Monetary Policy-Making in Postwar Britain’, Peter Burnham, British Politics, Volume 2, pages 395-419, 20 October 2007.
7. This topic will be covered in more detail in a second policy brief which will explore the explanatory potential of ‘derisking’ to describe the British economic growth model of recent decades and the turning of Britain’s economy into a playground for international capital at the expense of indigenous entrepreneurship and talent.
8. ‘Industrial Strategy, the British State, and the Common Good: Labour’s First Year’, John Denham and James Silverwood, Renewal, Volume 33, Issue 3-4, April 29, 2026.
9. ‘Review: The Big Con by Mariana Mazzucato and Rosie Collington review – how consultancy firms cash in‘, Hettie O’Brien, the Guardian, 16 February 2023.
10. ‘Industrial Strategy: Building a Britain fit for the future’, HM Government, 27 November 2017.
11. ‘Back to the Future? Rishi Sunak’s Industrial Strategy’, James Silverwood, Richard Woodward, The Political Quarterly, Volume 95, Issue 3, July/September 2024, Pages 535-543.
12. ‘The UK’s Modern Industrial Strategy’, CP1451, 23 June 2025.
13. ‘From Maggie to May: Forty Years of (De)industrial Strategy’, James Silverwood, Richard Woodward, The Political Quarterly, Volume 89, Issue 4, October/December 2018, Pages 631-639.
14. ‘What we do in the shadows: dual industrial policy during the Thatcher governments, 1979–1990′, James Silverwood, Richard Woodward, The British Journal of Politics and International Relations, Volume 25, Issue 2, May 2023, Pages 348-364.
15. ‘Industrial Strategy: Cable outlines vision for future of British industry’, 11 September 2012.
16. ‘Industrial Strategy, the British State, and the Common Good: Labour’s First Year’, John Denham and James Silverwood, Renewal, Volume 33, Issue 3-4, April 29, 2026.
17. ‘The distinctiveness of state capitalism in Britain: Market-making, industrial policy and economic space’, James Silverwood, Craig Berry, Environment and Planning A: Economy and Space, Volume 55, Issue 1, February 2023, Pages 122-142.
18. ‘The Show Must Go On: British Industrial Strategy and the Creative Industries’, James Silverwood and Kiev Ariza, Political Insight, Volume 12 issue 2, 36-39.
19. ‘The green lady? Environmental and industrial policy’, James Silverwood and James Jackson, in Elgar Companion to Margaret Thatcher, Edited by Philip Norton and Matt Beech),
20. ‘Industrial Strategy, the British State, and the Common Good: Labour’s First Year’, John Denham and James Silverwood, Renewal, Volume 33, Issue 3-4, April 29, 2026.
21. ‘Rebuilding Britain for the new world’: Liz Kendall’s speech at the Royal United Services Institute’, 28 April 2026.
