Over the past thirty years, the United Kingdom has been engaged in a major governance experiment. The most centralized nation among modern economies has been gradually devolving power to a growing number of Combined Authorities, almost all headed by mayors elected at the metropolitan scale.
The UK, like other countries, is adapting to profound macroeconomic shifts that include worsening geopolitical tensions, deepening climate crisis and accelerating technologies. The nation, in the words of Chancellor John Healey, is entering a “new age of industrialization”, simultaneously decarbonising, reshoring critical supply chains, investing heavily in energy, defence and national security, and trying to address some of the widest regional economic disparities in the developed world. A succession of strategies, plans and now a new Prime Minister are wrestling with these macroeconomic trends, and how to position the UK.
Although devolution has been underway for decades, Whitehall Ministries still control the purse strings and concentrate decision making. One estimate from the OECD suggested that local tax revenues amounted to 7% of total revenue, compared to an OECD average of 32%.
That is about to change. Andy Burnham, the former mayor of Greater Manchester and new Prime Minister, has made localism and a radical shift in power the central theme of his Administration and the prime vehicle for bringing growth to every post code in the nation.
As the shape and structure of devolution gets sorted, Burnham has focused primarily on devolving further funding around homelessness, housing and other key funding lines, on how to give mayors a greater share of taxes raised in their areas, as well as on handing mayors direct control of 16-19 education, employment support, affordable housing and research funding.
Our recent experience in South Yorkshire shows what the next step should look like for industrial revival: not a new competence for places, but a new approach focused on genuine co-design between national government and places.
For many central ministries, industrial and sectoral policy is seen as an area they largely control. Yet national economies are, in many respects, the aggregation and summation of metropolitan and regional economies. Nations that will thrive in this new economic era are those that strategically enable their regions to organise around their distinctive strengths, to accelerate the development and deployment of transformative technologies, and to drive growth in high-value, traded sectors that underpin national resilience and prosperity.
Given constrained resources and urgent pressures, success of a national industrial strategy will thus depend on a sharp understanding of and alignment with regional industrial and innovation strengths, as well as solving place-based investment challenges including land assembly, workforce development, supply chain modernization, technological innovation, corporate recruitment and private investment.
The need for sharp alignment is exceptionally high. The eight high growth sectors identified in the government’s Modern Industrial Strategy (June 2025) –- defence, advanced manufacturing, clean energy, life sciences, digital tech, professional and business services, creative industries, and financial services — are not spread evenly across the nation. Different city-regions have radically different starting points in these advanced industrial sectors, given their historic and current mix of manufacturing companies, university research, transport and logistics assets and talent pools.
As devolution and a new Prime Minister look to places to deliver the growth so desperately needed at the national level, it is critical to identify those city-regions which locate advanced manufacturing and applied research near each other. Virtuous growth feedback loops can be created where production and innovation assets are co-located. This is the key to developing higher-value industries and sustain long-term economic growth and resilience. This is also the path for reviving the UK industrial economy in a way that combines the strategic allocation of national resources and the smart deployment of new local powers.
The South Yorkshire Investment Playbook
Over the past three and a half years, the South Yorkshire Mayoral Combined Authority (SYMCA), brilliantly led by Mayor Oliver Coppard, has crafted and begun to implement a Local Growth Plan. The South Yorkshire Growth Plan sets out the region’s economic priorities for the next decade and includes concrete ways to regenerate key places and remove barriers to opportunity by investing in skills, health, housing and transportation.
As befits a region with a proud industrial heritage, South Yorkshire went one step further. It commissioned an objective assessment, what we call an “Investment Playbook,” of the region’s production and innovation assets to enable the alignment of the region’s distinctive strengths with the national Industrial Strategy. The South Yorkshire Investment Playbook was officially made public on September 18, 2026.
Development of the Investment Playbook required a substantial amount of work and multiple iterations. Despite significant UKRI spending, research grants are classified by funder and research subject, not by the sectors the Industrial Strategy prioritises. This says little, therefore, about which parts of the real economy public research supports.
To address this challenge, we created a new methodology for assessing the disparate strengths of the UK’s industrial regions, using a keyword-based algorithm to classify UKRI grants and patents by sector and sub-sector. Our research enabled us to compare where production and innovation synergistically co-locate in South Yorkshire, other Mayoral Combined Authorities (“MCAs”) and Greater London. We conducted this analysis for each of the eight priority industrial sectors plus a ninth, Upstream Manufacturing and Logistics, which captures the metals, fabrication and freight activities on which much of modern industry depends.
Our South Yorkshire Investment Playbook is a novel tool in the UK for identifying where a regional economy has genuine strengths in production and in innovation, and where the two reinforce each other. This textured, first-of-a-kind analysis helps discern where a region has distinctive strengths and advantages that can both help drive urgent national priorities around growth, security and resilience and advance local prosperity by increasing the base of mature manufacturing companies, jobs, skilled workers and entrepreneurial startups and scaleups in targeted geographies.
Our analysis shows that South Yorkshire has all the essential ingredients to become a critical node of the UK’s new industrial heartland. South Yorkshire’s deep industrial legacy has blessed it with an unusual mix of sectoral, spatial and ecosystem assets and national and international advantages. The region has a strong manufacturing legacy and research capabilities that are now being revalued.
These assets are already bearing fruit. Recent successes include Rotherham ranking among the fastest-growing sub-regions in the North over the past two decades, and Sheffield emerging as one of the UK’s fastest-growing core cities. South Yorkshire’s ICT sector grew by 175% between 2015 and 2023 — the fastest growth among established Combined Authorities, and faster than Greater Manchester’s 115%.
Our research said plainly: South Yorkshire is not good at everything, but it is exceptional in specific subsectors, and in the way its production and innovation assets sit together. This regional information is essential to national prosperity.
Here is what we found:
A specialized industrial base that national policy now needs. Around 214,000 jobs, 36% of the region’s employment, sit in the nine sectors. Among the twelve comparators, South Yorkshire has the most jobs per head in basic metals and in industrial machinery and tools, and it leads the North in metal and chemical materials, medical equipment machinery and transport. The assets are internationally significant: the Advanced Manufacturing Research Centre and Factory 2050 with Boeing, Rolls-Royce and McLaren alongside; the Nuclear AMRC; MOD-owned Sheffield Forgemasters; and ITM Power’s electrolyser plant, Europe’s largest. In a few cases, South Yorkshire’s strengths amount to sovereign capabilities which must be nurtured and sustained at all costs: the forgings and zero-defect precision engineering behind nuclear submarines, small modular reactors and offshore wind.
Production and innovation reinforce each other. Seven subsectors combine a strong job base with strong research, among them industrial machinery and tools, metal and chemical materials, sustainable mobility and clean power hydrogen. The University of Sheffield ranks eighth among UK universities for research connected to the national priority sectors, with around £240m of UKRI funding between 2020 and 2024, led by advanced manufacturing and life sciences. It is second nationally for UKRI funding in sustainable mobility, machinery and tools, engineering and technical consulting, and air and spacecraft machinery.
Defence has become a new route to market. In April 2026, the Ministry of Defence awarded South Yorkshire a £50m Defence Growth Deal, one of five nationally. Air and spacecraft machinery is small, at 350 jobs, but grew by 36% a year between 2018 and 2023 and is one of the region’s strongest diversification opportunities. The gap is in bringing local SMEs into defence supply chains, and in scaling their innovations.
A fast-growing tech sector. South Yorkshire has seen the fastest growth in information and communications technology of any Northern economy over the last decade. Its tech startups were valued at £3.3bn in 2025, up from £325m in 2015, with subsector strengths in deep tech, EdTech and gaming. Gaming and interactive entertainment is among the region’s strongest research specialisms per head. Hard-tech firms such as Opteran (bio-inspired AI), Phlux (infrared sensing) and FourJaw (manufacturing analytics) have emerged from the University and the AMRC, and venture investors including Northern Gritstone are backing them. Barnsley became the UK’s first government backed Tech Town in February 2026. Tech is the connective tissue of the wider economy; IT and telecoms services and engineering design are the most complex diversification openings the analysis identifies, and digital engineering is what links the region’s research to its factories.
A platform to climb from, not yet a Summit. Economic complexity measures how much productive know-how a place holds; how many different things its firms can make; and how hard those things are to make elsewhere. It matters because places grow by recombining capabilities they already have, and a varied, sophisticated base gives a region more routes into new industries when an old one declines. South Yorkshire rose from eleventh to eighth of twelve on complexity between 2009 and 2023, one of the largest improvements in the group. But it remains below the UK average, and the industries closest to its current base are themselves relatively simple. Left to drift, the region will do more of the same. That is the case for deliberate choices: industrial machinery (the most feasible move, and the one that opens most doors), engineering and technical consulting, IT services, electronic equipment, medical and biotech research, and air and spacecraft machinery.
What’s Next
The South Yorkshire Investment Playbook is a leap forward on understanding the UK’s industrial economy. This is regional analysis with a national purpose that can be adapted across the country.
We see several steps forward for the region and the nation.
More regions should apply the Investment Playbook methodology. It gives places a disciplined basis for choosing where to focus, by understanding the local traded sector and by separating three kinds of opportunity: where production and research already reinforce each other and should be consolidated; where research runs ahead of local jobs and needs to be commercialized; and where complexity points to adjacent capabilities a place can realistically build. Each call for a different strategy, and growth plans should say explicitly which they are pursuing and how they will measure it: the share of research projects with local industrial partners, the number of spinouts that scale locally, and the local share of defence and energy supply chains.
The South Yorkshire Investment Playbook contains comparative analysis of the strengths of South Yorkshire, other MCAs and Greater London. Perfect is the enemy of the good; we should not wait for improvements to data mining to conduct other diagnostics. Adapting the methodology to two to three other MCAs that have combined production and innovation assets that are essential to national security can and should happen asap.
We need to understand the innovation side of the industrial equation far better. There is no official way to see which sectors, subsectors or places are supported by public research; we need to build one. Our classification was processed in early 2025 and, like any keyword method, involves judgment. It cannot see Ministry of Defence research, which accounts for more than 80% of publicly funded defence R&D, a major blind spot for defence regions. UKRI and DSIT should publish grant level data tagged to the Industrial Strategy sectors and to place, with a consistent rule for attributing multi-partner grants, and bring defence research into the same frame. As innovation funding is devolved, mayors cannot direct resources towards strengths they cannot see.
The interplay between production and innovation at the national and local levels needs to be strengthened. South Yorkshire’s research is world class, but its connections are not local. Four of the University of Sheffield’s five largest non-academic research partners sit outside the region and none of its five largest partners is in the North; 77% of defence related UKRI funding to the region involve partners from elsewhere. A national map of where production and innovation meet, subsector by subsector, would let government back complementary clusters rather than competing ones.
Prime Minister Burnham clearly sees the connection. As he declared in his seminal Manchester address before taking office: “On reindustrialisation, we will support every region to set clear and credible industrial ambitions — and provide the support to achieve them.”
For the first time in decades, the combination of devolution and industrial revival gives the UK, at the national and metropolitan scale, an opportunity to follow Dolly Parton’s oft cited guidance — “Figure out who you are and do it on purpose.”
Bruce Katz is the Founder of New Localism Associates and a Visiting Professor in Practice at the London School of Economics. Victoria Orozco is the Founder of Punto Data LLC. The authors would like to thank Tom Bousfield, a former Treasury and SYMCA official, for his guidance throughout the Investment Playbook process and his contributions to this piece.