Last week, PUBLIC supported Queen Elizabeth Park Innovation District (fmr. SHIFT) to host the Innovation Forum off the back of the first iteration of the Future Industries Demonstrator Programme, an initiative that has been created to support London-based startups and SMEs that are working on solutions to the climate crisis. A big focus of the conversation was on how the programme has succeeded in building a local net zero and circular economy ecosystem, especially centred around East London.
This discussion is not unique to London, nor to the net zero sector. Across the country, local areas have an opportunity to build local ecosystems focused on emerging technology areas. These geographically concentrated ecosystems of companies, local institutions, investors, innovation zones, research institutions – and more – are referred to as ‘clusters’.
This article shares learnings from the Innovation Forum event, and reflects on strategies for building local innovation clusters across the country.
There are a number of national policy drivers encouraging them to do so. For instance, the UK’s Modern Industrial Strategy empowers local authorities to lead regional economic growth by fostering collaborations with businesses and academia. The AI Opportunities Action Plan offers a clear framework for local governments to leverage artificial intelligence to improve public services and efficiency. The Spring Statement emphasises the need for innovation, supporting smart investments in technology and infrastructure. Additionally, as noted earlier, devolution efforts give local governments greater autonomy to create place-based solutions that address the unique challenges of their regions. As part of this initiative, all Mayoral Strategic Authorities are required to develop Local Growth Plans, with a focus on local technology and innovation. These plans will outline a decade-long vision for regional growth and include specific, actionable steps to achieve these goals.
Aligned with the policies above, local growth plans must prioritise innovation clustering as a central element of their strategy. By fostering industry-specific hubs where businesses, research institutions, and local stakeholders can collaborate, regions can accelerate technological advancements and economic growth.
A valuable starting point might be the UK’s Industrial Strategy (although a revamped sector strategy is expected soon from the new government) which highlights priority sectors that are expected to fuel future growth and innovation. These include:
These national priorities provide a strong foundation for local governments to build upon, but the real challenge lies in aligning these broader goals with the specific strengths and opportunities present in each region.
In light of the evolving policies and shifting funding landscapes outlined above, local governments now have a unique opportunity to leverage key sectors from the UK’s Industrial Strategy to drive regional innovation, unlocking significant potential for economic growth and the transformation of public services. To unlock this potential, local governments must take a strategic, data-driven approach that aligns both national priorities with their region’s unique strengths, ensuring sustainable growth and long-term success.
Prioritising which sectors to focus on necessitates a rigorous research and analysis procedure. This comprehensive approach could involve several key steps:
By following a structured approach that combines data-driven analysis with an understanding of local strengths, local governments can ensure their innovation strategies are both ambitious and achievable, positioning them to lead the way in driving regional economic and social progress.
Promising cluster opportunities for local areas
Every local authority possesses its own set of unique strengths, whether it’s a thriving tech hub, a rich history of manufacturing excellence, proximity to leading academic institutions, or access to natural resources. These strengths are not only assets but also critical drivers of innovation and economic growth. For instance, areas with high broadband speed, strong R&D investment, and a highly skilled workforce are more likely to foster innovation, as highlighted in the UK’s Index of Innovation and Growth. Conversely, rural areas often face challenges such as limited digital infrastructure, which can hinder their ability to capitalise on emerging opportunities.
To identify key sectors with high growth potential, we have analysed regional conditions including infrastructure, talent availability, and existing economic clusters alongside broader national priorities such as net-zero goals and digital transformation.
Below is an outline of some of the key sectors being pursued by regional areas across the UK. For each sector, we briefly explore how these factors impact its growth.
AI is widely recognised as a driving force for innovation, productivity, and economic growth, as demonstrated by initiatives like the AI Opportunities Action Plan and the UK Innovation Strategy. However, when prioritising AI-based clusters, it is crucial to consider regional factors like existing skill levels, industry needs, relevance of AI use cases, and available resources like funding. To that end, urban hubs, particularly cities with strong university research ecosystems like Cambridge and Manchester are well-positioned to attract AI companies due to their access to local talent and businesses adopting AI solutions.
When it comes to health and social care industries, regions with established healthcare infrastructure are well-positioned to prioritise life sciences and MedTech clusters. These areas benefit from strong foundations in healthcare, making them attractive for investment in innovative technologies and solutions.
In contrast, regions facing an undersupply of healthcare facilities, such as parts of the Midlands and East of England, are ripe for investment in expanding healthcare services and infrastructure. Such investments can address regional gaps, enhance care delivery, and create growth opportunities in the sector.
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The UK’s Net Zero goals offer significant opportunities for regional innovation in renewable energy, with certain regions uniquely positioned to lead in specific sectors. Offshore wind hubs, such as Suffolk, exemplify regions where established infrastructure and natural resources align to drive growth. These areas can capitalise on the UK’s offshore wind targets, positioning themselves as global leaders in sustainable energy.
Similarly, Scotland and Wales, with natural resources and existing energy infrastructure such as wind turbines, are well-positioned to lead the transition to a green hydrogen economy. Investment in these regions can diversify the UK's clean energy portfolio while supporting regional economic growth, particularly in rural and coastal communities.
Improved connectivity infrastructure - especially 5G - can unlock a wide range of benefits for local businesses and asset operators. This explains why many regions across the UK have explored 5G innovation programmes and hubs, with a focus on use cases in manufacturing and logistics. In particular, ports and airport cities, such as Felixstowe in Suffolk, or Teesside International Airport within Tees Valley Combined Authority, offer promising opportunities for improved connectivity. These regions can integrate digital connectivity with logistics and trade, driving operational efficiency and developing new business models in the supply chain sector. By capitalising on their strategic locations and strong infrastructure, these areas can emerge as leaders in the global digital economy.
The transport sector offers significant opportunities for innovation, particularly in the context of electrification and automation. Regions with established manufacturing bases, such as the West Midlands, are well-positioned to lead in the development of electric vehicles (EVs) and autonomous transport technologies. Leveraging their existing industrial capabilities, these regions can play a central role in the UK's shift towards sustainable transport systems. As demand for EVs grows and technological advancements accelerate, local economies can drive innovation, create high-value jobs, and contribute to the broader decarbonisation agenda.
Emerging transport plans across the UK also present an opportunity to enhance infrastructure and connectivity. In regions like the West Midlands, aligning these plans with existing manufacturing strengths can create synergies that drive both economic growth and technological progress. By integrating advanced transport solutions into the infrastructure, local authorities can improve mobility, boost regional competitiveness, and support the transition to a more sustainable, efficient transport system.
Across the UK, various regions have embraced sector-specific clustering, where interconnected businesses, universities, and research institutions work in close proximity to foster collaboration, knowledge sharing, and innovation.
At our recent GovTech Summit, we heard from the Thames Freeport team about the impressive work they are undertaking to stimulate investment in the region in key innovation verticals. This includes their recent health and care technology accelerator, which is working with UK and global businesses - and local healthcare bodies - to pilot novel technologies in health and care. At the same time, it is aiming to build a specialised cluster for health and care technology in the area, and attract inward investment.
Beyond this, here are four other examples that have inspired us:
Cambridge has become a prime example, with its thriving ecosystem of technology, biotechnology, and AI companies centred around the University of Cambridge. The city is home to over 5,000 tech firms, generating £46.6bn in annual revenue. Its success illustrates how a university-driven cluster can stimulate substantial economic activity. The integration of AI and quantum computing into local industries signals an exciting future where academic research and commercial ventures are intertwined for real-world applications.
In the West Midlands, a deep focus on advanced manufacturing in sectors like aerospace, automotive, and rail has placed the region at the forefront of innovation. Backed by companies like Rolls-Royce and Jaguar Land Rover, the region boasts over £16bn GVA generated by the manufacturing sector for the national economy. This legacy of innovation is evolving to incorporate automation and advanced robotics, ensuring sustained growth and competitiveness in the face of external challenges.
Suffolk is harnessing its strength in logistics and clean energy, with the Port of Felixstowe ,which handles approximately 48% of Britain’s containerised trade, leading a strategic push toward offshore wind and sustainable infrastructure. The region’s focus on renewable energy aligns with national goals, positioning Suffolk as a key player in the green economy. The port alone drives significant economic impact, handling over 4 million containers annually and contributing greatly to the local economy.
Glasgow, similarly, is positioning itself as a hub for green tech and digital innovation, where sustainability and technology are increasingly interwoven. It is one of the fastest-growing clusters in the UK, with almost 34,000 jobs and a turnover of more than £1bn. The city’s focus on renewable energy and digital services helps future-proof its economy, making it an attractive destination for investment in sustainable technologies.
These examples show how regions can channel their unique assets, whether through academic institutions, established industries, or emerging technologies. into dynamic clusters that naturally fuel growth. Local governments are increasingly recognising the potential to transform these strengths into tomorrow’s innovation drivers.
As the government’s digital partner, PUBLIC has the expertise and experience to help local governments navigate the challenges of identifying and capitalising on innovation opportunities through careful research, analysis and community engagement.
From developing a national PropTech cluster strategy with MHCLG, mapping over 800 companies and pinpointing growth sectors, to supporting the FCDO in creating international tech clusters in Central and Eastern Europe, PUBLIC has a proven track record in fostering collaboration and driving economic growth. On the local level, our work with the SHIFT programme shows how tailored, regional innovation clusters can unlock the full potential of local economies, helping governments turn opportunities into tangible outcomes.
In the next article in this series, we will be discussing strategies for how regions can support their local economies, having identified which clusters and activities to prioritise.
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