Wales and the UK Industrial Strategy: Innovation challenges and opportunities
Wales and the UK Industrial Strategy: Innovation challenges and opportunities
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The release of the UK’s Modern Industrial Strategy presents a significant opportunity for Welsh SMEs, but it also highlights that building an innovation economy is neither easy nor inevitable. For Welsh businesses to truly capitalise on this moment, we need to confront some uncomfortable truths about what innovation actually requires.
The Innovation Challenge
Innovation as a strategy is a no-brainer on paper. More innovative companies increase productivity, create wealth, and if they’re home-grown are more likely to set roots and grow locally. But the challenge with taking an R&D and innovation-centred approach is that it requires companies to rip up a lot of the conventional rule books.
You have to be prepared to be wrong, able to suffer significant losses in the early years, and be willing to travel to an unknown destination. The mindset required to deal with that does not come as standard. You need to recruit a team that is also able to cope with the uncertainty and volatility of innovation.
Innovation can look quite bleak and messy when you’re in the middle of it. You don’t know whether any of this thinking will lead anywhere, you’re too entrenched to turn around, and your team are low on stamina. You don’t need to have blind faith, but if you lose the faith and don’t believe it will succeed then the game is up.
This reality is clearly highlighted in last month’s UK Modern Industrial Strategy itself: “In recent years there has been a slowdown in innovation, with the proportion of ‘innovation active’ firms decreasing… [despite continuing] to attract businesses to start up, we have a poor track record of scaling and retaining them.”
The Welsh Context
Wales faces its own particular challenges in this landscape. Without a mature venture capital ecosystem, getting innovation-focused companies through the valley of death can feel impossible. You need access to talent, resources, and expertise, which is short in supply and high in demand.
If we want to succeed, and see SMEs in Wales make the most of the opportunity presented by the UK’s Industrial Strategy, we need to demand more resources, and use the tools and advantages that we have to hand. We need to face up to the fact that innovation-readiness is not a default state, and learn from past lessons and mistakes.
Wales’ Strategic Position
Across the IS-8 priority sectors identified in the strategy – advanced manufacturing, creative industries, life sciences, clean energy, defence, digital and technologies, professional and business services, and financial services – we already have a head start in Wales. But we’ve also learnt valuable lessons about how to drive innovation in those sectors.
Through projects like Media Cymru, we’ve seen close up the mindset shift needed to encourage R&D innovation in the creative industries, moving beyond the skillset required for day-to-day operations. These positive outcomes can be achieved, but they need patience and investment.
The creative industries are a perfect example that demonstrates that innovation culture isn’t just about having the right policies or funding – it’s about fundamentally changing how business leaders and teams think about risk, failure, markets, and long-term value creation.
Learning from the Best
While Wales builds its innovation capabilities and identity, we can learn from institutions that have spent decades perfecting the art of turning research into world-changing companies. MIT, for instance, has spent 80 years at the forefront of innovation, since the establishment of the Rad Lab in the 1940s. Research and development is a philosophy there, and is completely unavoidable.
Having the opportunity to understand how mature innovation ecosystems operate – their culture, their approach to risk, their methods for progressing breakthrough thinking – is an important step toward creating and improving our own national innovation culture. Wales has a one-of-a-kind partnership with MIT that we need to fully take advantage of.
The Path Forward
Building innovation readiness requires more than just good intentions. It demands a systematic approach to developing the infrastructure, culture, and support systems that innovative companies need to make the most of the opportunity.
This includes creating pathways for businesses to access the expertise and networks they need during the difficult early stages of innovation. It means building tolerance for the messiness and uncertainty that comes with genuinely breakthrough thinking. And it requires patience from investors, policymakers, and the broader business community as companies navigate the inevitable setbacks that come with pushing boundaries and seeking new frontiers.
The UK’s Industrial Strategy provides a framework, but Wales must develop its own approach to implementation – one that builds on our existing strengths while addressing the cultural and structural barriers that have historically limited our innovation potential.
We can’t just copy and paste what works elsewhere – we need to build on what we’re already good at while being honest about the barriers that have held us back.
With Wales’ established strengths across the Industrial Strategy’s priority sectors, we have the foundation needed to build a thriving innovation economy. But realising that potential will require more than just recognising opportunities – it will demand the courage to embrace the uncertainty and long-term thinking that true innovation requires.
The question isn’t whether Wales can benefit from the Industrial Strategy, but whether we’re prepared to do the hard work of building the innovation culture needed to make the most of it.
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