Rebecca Riley analyses the likely next Prime Minister’s flagship speech through the lens of City-REDI and the LPIP Hub’s research, looking specifically at plans for industrial strategy.
We take a look at Andy Burnham’s plans for devolution in this blog.
Burnham’s speech implicitly raises a question that has been simmering in industrial strategy circles since the publication of the government’s eight priority growth sectors (the IS-8): who gets to define what a “cluster” is, and does the national framework actually capture what is happening in places like Greater Manchester and the West Midlands?
The government’s Industrial Strategy, published in November 2025, identifies eight sectors as the engines of future UK growth: Advanced Manufacturing, Clean Energy Industries, Creative Industries, Defence, Digital and Technologies, Financial Services, Life Sciences, and Professional and Business Services. Spatial analysis by The Data City and the Centre for Cities has since mapped where these sectors concentrate, and the results pose an uncomfortable challenge for any devolution-led industrial strategy. But the picture is considerably more contested than it first appears. The government’s own sector definitions acknowledge that several of the IS-8 cannot be reliably measured using standard industrial classifications; City-REDI and the LPIP Hub’s research demonstrates that real innovation increasingly occurs across sectors rather than within them; and the place-based cluster architectures being built in Greater Manchester and the West Midlands bear only a partial resemblance to the national framework they are supposed to sit beneath.
This section examines the evidence from three angles: the spatial concentration data, the measurement problem, and the cross-sectoral alternative, and asks what Burnham’s place-first approach means for how we think about industrial strategy in practice.
The IS-8 Sectors vs Burnham’s Place-Based Clusters
Burnham’s approach, both in today’s speech and in his January 2026 cluster map for Greater Manchester (GM), takes a fundamentally different starting point. Rather than asking “where do these national sectors land?”, he asks, “what are our place-based strengths?” and builds clusters around them. GM’s five clusters (Advanced Materials & Manufacturing, Digital/Cyber/AI, Health Innovation & Life Sciences, Creative Industries, Low Carbon) overlap partially with the IS-8 but are spatially defined and locally governed, not nationally imposed.
Three Ways Burnham’s Approach Could Change the IS-8 Landscape
1. Who decides what a “cluster” is, and where
Burnham’s speech today explicitly said he would “support every region to set clear and credible industrial ambitions”, with Number 10 North coordinating but not dictating. This is a bottom-up challenge to the IS-8’s top-down logic. If every combined authority defines its own clusters, as GM has done, the IS-8 could become more of a loose national framework than a binding sectoral architecture.
Research from the Economic Intelligence Unit and City-REDI for the West Midlands Combined Authority, the West Midlands Futures report is directly relevant here. It identified 22 emerging and future sectoral opportunities for the West Midlands, many of which cut across IS-8 categories (e.g., FoodTech, Rehabilitation, Pyrolysis, Immersive Technologies). Hannes Read’s blog on “Developing Priority Clusters across Greater Birmingham” argues that economies develop in layers shaped by history, and that understanding evolutionary economic geography is essential for effective cluster policy. This supports Burnham’s place-first approach but also implies that nationally defined sectors will inevitably look different in every place.
2. The “not spots” problem. Whose Clusters? The Tension Between National Sectors and Place-Based Strengths
Burnham’s speech implicitly raises a question that has been simmering in industrial strategy circles since the publication of the government’s eight priority growth sectors (the IS-8): who gets to define what a “cluster” is, and does the national framework actually capture what is happening in places like Greater Manchester and the West Midlands?
The answer depends, to a striking degree, on how you measure it, and the emerging evidence suggests the national picture may be considerably more contested than it first appears.
The “Not Spots” Problem
The most widely cited spatial analysis of the IS-8 comes from The Data City, whose work with the Centre for Cities maps firm-level data against the eight sectors at the ITL2 (county/city-region) level. The findings are stark: Greater Manchester does not score above 1 (a location quotient indicating specialisation) for a single IS-8 sector. Neither does the West Midlands, whose “overperformance of Advanced Manufacturing and underperformance on service-based sectors is more akin to a rural area than a large urban one.” Five major economic areas, Kent, Essex, Lancashire, Greater Manchester and West Yorkshire, have no IS-8 specialism at all. The IS-8 service sectors (Creative Industries, Digital and Technologies, Financial Services, and Professional and Business Services) co-locate heavily, with correlation coefficients of 0.6–0.8, concentrating overwhelmingly in the Greater South East. Only Bristol and Edinburgh have specialisms in all eight sectors.
On this reading, Burnham’s devolution heartlands are precisely the places where the IS-8 are weakest, a fundamental paradox for a Prime Minister proposing to devolve industrial strategy to the regions.
But Can the IS-8 Actually Be Measured?
Here, the picture becomes considerably more complicated. The government’s own IS-8 Sector Definitions List, published alongside the Industrial Strategy Green Paper, contains a remarkably candid set of admissions (which are not new to us researchers) about the limitations of standard industrial classification (SIC) codes, the backbone of most spatial economic analysis:
- Clean Energy Industries: “The SIC classification system is too restrictive to identify this sector.”
- Defence: “The SIC classification system is too restrictive to identify this sector.”
- Digital and Technologies frontier industries (AI, Cybersecurity, Quantum Computing, Semiconductors, Engineering Biology): all “cannot be easily reflected using the SIC system.”
- Life Sciences: SIC codes “only account for part of the Life Sciences sector.”
This is not a minor technical caveat. It means that four of the eight growth sectors cannot be reliably measured using standard methods, and these are precisely the sectors where the most transformative innovation is occurring. The Data City supplements SIC codes with web-scraping and Real-Time Industrial Classifications (RTICs), which partially addresses the problem but may systematically undercount manufacturing-oriented, supply-chain-embedded firms that are less digitally visible than service-sector companies. A precision engineering firm in Coventry supplying components to Rolls-Royce’s small modular reactor programme, for instance, may not self-describe as “Clean Energy” on its website, but it is unambiguously part of that cluster.
The House of Commons Business and Trade Committee, in its June 2025 report on the Industrial Strategy, reached a similar conclusion. It noted that IS-8 overlaps are so significant that it is “impossible to estimate the contribution of each to overall GDP.” Make UK told the Committee that “the complexity of modern manufacturing supply chains, or more accurately networks, is such that it is difficult to clearly demarcate between individual sectors.” And the Centre for Urban and Regional Development Studies (CURDS) at Newcastle University warned that a “narrow sectoral focus will only reproduce, if not also reinforce, uneven development.”
The LPIP Hub’s research provides a concrete, sector-specific illustration of this measurement problem. Cincik’s Policy Fragmentation and Place-Based Opportunity in UK Fashion and Textiles (Cincik, 2026) demonstrates that “the narrow definitions of what determines creative industries or even defence spending, mean that all too often our talented local suppliers, whether that is for onshoring fashion production, or onshoring manufacturing for defence clothing, translate as repeated missed opportunities to support economic growth across the UK.” Fashion and textiles manufacturing sits across at least three IS-8 categories, Creative Industries, Advanced Manufacturing, and Defence, but falls through the cracks of all three in the current framework. A textile manufacturer in the East Midlands producing technical fabrics for military uniforms is simultaneously a creative industry, an advanced manufacturer, and a defence supplier, yet may register as none of these in SIC-code-based analysis, and its web presence may not use the terminology that RTIC-based scraping would capture. Cincik’s work shows this is not a theoretical problem: it translates directly into missed policy opportunities, with firms excluded from sector-specific support programmes despite sitting at the intersection of multiple national priorities.
Even the Centre for Cities, whose work with The Data City produced the “not spots” analysis, qualifies its own findings, acknowledging that “interventions to support specific sectors should be at least as much about place as they are about any specific sector” and that “while sectors are often presented as separate economic activities, the reality is that they are ever more blurred.”
City-REDI’s Cross-Sectoral Alternative
City-REDI’s own evidence to the Business and Trade Committee (IND0059) makes a direct case for a different analytical approach. The submission argues that “facilitating cross-sectoral synergies will be the key for future growth opportunities, by combining core industrial technologies and excellence in deployment of enabling technologies.” The IS-8 framework, it contends, is too narrowly defined to capture real innovation “the UK’s main areas of innovation are rather narrowly focussed… for the growth of national and regional economies, a broader range of actors and intermediaries are of crucial importance.”
This is not merely a theoretical objection. the West Midlands Futures report identified 22 emerging and future sectoral opportunities for the region, many of which cut across IS-8 categories entirely. FoodTech, Rehabilitation, Pyrolysis, Immersive Technologies: none of these fit neatly into a single IS-8 box, yet each represents a genuine area of regional comparative advantage rooted in the West Midlands’ specific industrial heritage, university research strengths, and institutional assets.
The real-world cluster architecture being built in the West Midlands further contradicts the “not spot” label. The WMCA’s Growth Plan (2026) identifies five priority clusters: Advanced Engineering/EVs/Batteries, CleanTech, Health and Medical Devices, Next Generation Services, and Digital Creative and Tech, which map across multiple IS-8 categories simultaneously. The WMCA’s Cluster Growth Profiles project £2.9–3.2 billion in additional GVA and 40,300–44,800 jobs across eight locally defined clusters. And Project MADE, launched in May 2026, aims to create a £44 billion advanced manufacturing supercluster with 5% compound GVA growth, noting that the region “produces more manufactured goods than Greater Manchester, West Yorkshire and the Liverpool City Region combined.”
Meanwhile, City-REDI’s work on innovation intermediaries (Ioramashvili et al., 2025) demonstrates how publicly funded organisations, incubators, accelerators, Catapult Centres, and university enterprise zones help bridge the gap between academic research and business innovation in specific territorial contexts. These intermediaries operate across IS-8 categories, not within them. Chloe Billing’s research on the Midlands Space Cluster (Billing, 2025) shows how work-integrated learning models can support skills pipelines within place-based clusters that straddle defence, digital, advanced manufacturing and clean energy, four IS-8 sectors treated as one functional ecosystem. Kitagawa, Okamuro, and Ikeuchi’s (2025) work on cluster policy and university-industry collaboration in Japan reinforces this point: geography, not sectoral taxonomy, is the primary determinant of how innovation partnerships form.
Billing’s Innovation Evidence Review (Billing, 2024), published through the LPIP Hub, synthesises the broader evidence base on place-based innovation policy and finds that “innovation policies are increasingly shifting away from top-down and centralised approaches towards policies that favour cooperative, multi-actor and often more place-based approaches.” This trajectory, documented across OECD countries, suggests that the IS-8’s sector-first logic is increasingly out of step with international best practice. The review identifies four key enablers of place-based innovation: anchor institutions (particularly universities and hospitals), intermediary organisations, collaborative governance structures, and patient public investment. All four are present in the West Midlands and Greater Manchester, but none of them maps neatly onto individual IS-8 sectors. They are, by their nature, cross-cutting assets whose value lies precisely in their ability to connect different sectors, disciplines, and types of organisation within a specific territorial context.
Hoole and Newman’s (2024) work on the intersection of productivity and governance capacity adds a further dimension. Their research shows that “some devolved regions risk becoming ‘devolution peripheries’, areas that formally have devolved powers but lack the institutional depth to exercise them effectively. If the IS-8 framework remains the basis for national funding allocation, places that don’t register as IS-8 “hot spots” may find themselves doubly disadvantaged: unable to attract sector-specific investment and lacking the capacity to articulate their cross-sectoral strengths in the language Whitehall understands.
What This Means for Burnham’s Approach
This analytical tension is not merely academic; it goes to the heart of whether Burnham’s place-based cluster model is a viable alternative to the IS-8 framework or a recipe for incoherence.
Greater Manchester’s own cluster map, published in January 2026, defines five locally anchored clusters: Advanced Materials and Manufacturing, Digital/Cyber/AI, Health Innovation and Life Sciences, Creative Industries, and Low Carbon. These overlap partially with the IS-8 but are spatially defined and locally governed, built around specific assets, Atom Valley, MediaCity, the Oxford Road Corridor, Bruntwood SciTech, rather than national sectoral benchmarks. Burnham’s promise today to “support every region to set clear and credible industrial ambitions” implies extending this model nationally.
Two further pieces of LPIP Hub research sharpen this point. Atkins’s Developing Place-Based Green Industrial Policy in the UK (Atkins, 2026) examines the Vestas, BiFab, and Britishvolt cases, three high-profile green industrial investments that failed or stalled, and finds that “gaps between political ambition and political economy have led to missed opportunities and industrial precarity.” The Clean Energy Industries IS-8 sector, in other words, cannot be built through sectoral designation alone: it requires place-sensitive industrial policy that accounts for supply chain depth, skills availability, planning infrastructure, and long-term demand certainty. Atkins’s companion paper, Skills Matter in Place-Based Green Industrial Policy: Lessons from the Closure of MG Rover (Atkins, 2026), adds historical depth to the West Midlands cluster narrative specifically. The MG Rover closure in 2005 demonstrated that “proactive, place-based, and skills-centred interventions helped mitigate the regional economic impacts of closure”, but also that “many workers found themselves in lower-paid and insecure jobs because of a lack of clear pipelines into new manufacturing work.” Two decades later, the West Midlands is building new advanced manufacturing clusters in EVs, batteries, and clean energy, but Atkins’s evidence suggests that without deliberate skills pipeline investment, the same pattern of dislocation and downward occupational mobility could recur.
The LPIP Hub’s Regional Pathways to Net Zero (Lyons and Brand, 2026) reinforces this from a different angle. The report demonstrates that “pathways to net zero must reflect local economic structures, energy systems and institutional capacities”, meaning that the Clean Energy IS-8 sector looks fundamentally different in the West Midlands (where it is embedded in advanced manufacturing supply chains) than in Scotland (where it is driven by offshore wind and hydrogen) or the South West (where it centres on nuclear and marine energy). A single national sector definition cannot capture these place-specific configurations, and funding or measurement frameworks that treat “Clean Energy” as a uniform category risk misallocating resources and misunderstanding where genuine capabilities lie.
The evidence suggests three things:
First, the “not spots” analysis is real but incomplete. Location quotients at ITL2 level capture something genuine about the spatial concentration of the IS-8 service sectors in London and the South East. But they miss the manufacturing depth, cross-sectoral complexity, and institutionally embedded innovation assets that exist in places like the West Midlands and Greater Manchester. The government’s own admission that four of its eight sectors cannot be reliably measured using standard classifications should give pause to anyone using those classifications to write off entire city-regions.
Second, City-REDI’s cross-sectoral approach is analytically stronger for understanding how innovation actually works in places. Real clusters are not SIC-code silos; they are ecosystems of firms, universities, intermediaries, and public institutions that share geography, supply chains, and labour markets across sectoral boundaries. The West Midlands Investment Zone, targeting “electric vehicle and battery technology, green industries, health-tech and the critical underpinning digital platforms,” is a working example of this logic in practice.
Third, the risk lies in the transition. If Burnham devolves cluster definition to combined authorities but national funding, including the IS-8-aligned investment streams, continues to flow through central government sectoral channels, locally defined clusters may struggle to access resources. The Business and Trade Committee’s finding that IS-8 contributions to GDP are “impossible to estimate” suggests that even the national government has not resolved the measurement problem. Until it does, there is a danger that places are judged against a framework that cannot accurately capture their strengths, and that Burnham’s devolution of industrial strategy runs ahead of the fiscal architecture needed to support it.
Verdict: Burnham’s instinct, that places should define their own clusters rather than conforming to national sectoral benchmarks, is well supported by the evidence. But the transition from an IS-8-aligned national framework to a genuinely place-based industrial strategy requires resolving deep measurement, funding, and governance questions that neither the current government nor Burnham’s speech has yet addressed.
3. Cross-sectoral clustering and the foundational economy
Fundamentally, Burnham’s speech emphasised the foundational economy, housing, utilities, transport, public services, as the bedrock on which high-value clusters are built. City-REDI’s work on the foundational economy and on innovation procurement (Billing, 2024) supports this: public procurement and foundational services can either enable or constrain cluster development.
What City-REDI’s Research Says
Several pieces are directly relevant:
- Ioramashvili et al.’s work on innovation intermediaries (2025) shows how publicly funded intermediaries help bridge the gap between university research and business innovation in specific territorial contexts, which is exactly the kind of place-based infrastructure Burnham’s cluster model relies on.
- Kitagawa et al.’s cluster policy research (2025) examines how university-industry collaboration in Japan is shaped by cluster policy, finding that geography significantly affects partnership patterns. This is “especially relevant now, as interest in developing regional industrial clusters is growing in the UK”.
- The WMCA Cluster Growth Profiles and West Midlands Futures report provide a direct comparator to GM’s cluster map, with the West Midlands identifying clusters in EV/battery manufacturing, health-tech/med-tech, aerospace, logistics, professional services, creative content, and future housing.
- Billing’s work on the Midlands Space Cluster (2025) demonstrates how work-integrated learning models can support skills development within specific clusters, precisely the kind of devolved skills commissioning Burnham is calling for.
My Assessment
Burnham’s approach doesn’t so much change the IS-8 clusters as subordinate them to a place-based logic, place first – cluster/specialisation second. The IS-8 sectors would remain as a national framework, but the operationally meaningful unit would become locally defined clusters, spatially anchored, cross-cutting IS-8 categories, and governed by combined authorities with devolved powers over skills, procurement, and investment.
The risk, which City-REDI’s research on the “devolution periphery” highlights, is that places with the weakest institutional capacity end up unable to define or develop their own clusters effectively, widening rather than narrowing spatial inequalities.
This blog was written by Rebecca Riley, Professor for Enterprise, Engagement and Impact, City-REDI, University of Birmingham and the Director of the LPIP Hub, with assistance from AI.
This blog draws on research by the City-Region Economic Development Institute (City-REDI) at the University of Birmingham. Key publications referenced include work by Charlotte Hoole, Anne Green, Andy Pike, Abigail Taylor, Chloe Billing, Jonathan Davies, Jack Newman, Fumi Kitagawa, Simon Collinson, Rebecca Riley, Johannes Read, Sara Hassan, and many others. Full publications are available at the City-REDI publications page.
Find out more about the Local Policy Innovation Partnership Hub.
Disclaimer:
The views expressed in this post are those of the author and not necessarily those of City-REDI or the University of Birmingham.