The United Kingdom (UK) government’s Industrial Strategy Green Paper (Industrial Strategy)[1] sets out an ambitious vision to position the UK as a global leader in high-growth sectors, ensuring sustainable and inclusive economic growth. As the government prepares to launch this strategy, the UK’s Competition and Markets Authority (CMA) has reinforced its role in fostering competition to ensure long-term prosperity. This blog post will explore the key themes in the CMA’s response to the strategy, focusing on how it might shift its approach to mergers and how it balances competition with investments—all crucial for achieving the UK’s economic goals.
A Roadmap to 2035: The UK’s Industrial Strategy Green Paper
Released in late 2024, the Industrial Strategy will guide the country towards a decade of enhanced investment, job creation, and productivity. At the core of this strategy is the goal of addressing barriers to growth across key sectors, driving innovation, and fostering stronger regional economies. Eight high-potential sectors have been identified for targeted growth: Advanced Manufacturing, Clean Energy, Creative Industries, Defence, Digital and Technology, Financial Services, Life Sciences, and Professional and Business Services.[2]
In the next stage of development, the government will prioritize subsectors within these broader categories in which specific barriers to growth can be addressed.[3] Through bespoke sector plans, developed in partnership with business leaders, devolved governments, and experts, the strategy aims to unlock the UK’s full potential.[4] These plans will be published alongside the Spending Review in Spring 2025.
Competition is a Key Driver of Growth: The CMA’s Response
As of January 2025, the CMA has articulated its Response to the Green Paper,[5] reinforcing its belief that competition is a key driver of sustainable growth. The Authority’s response is rooted in a recognition that competitive markets not only spur innovation but are essential for long-term economic resilience. The CMA plays an essential role in supporting the Industrial Strategy through two main roles: advisory and direct action.[6]
Advisory Role: The CMA offers guidance to government bodies, ensuring that pro-competitive principles are embedded in policymaking and investment strategies.
Direct Action: The CMA takes proactive measures to promote competitive markets through market studies, consumer protection laws, and the scrutiny of mergers and acquisitions.
Merger Control Trends and an Evolving Approach to Remedies
Regarding the direct role of the CMA in the scrutiny of mergers, two recent trends are worth mentioning. First, the number of frustrated deals in the U.K. in 2023 was six, a notably high number compared to the European Commission, which only blocked the Booking/eTraveli deal that year.[7] This is not surprising given data suggesting that antitrust authorities have recently become more interventionist on a global scale, with a 54% increase in prohibitions and a 15% rise in overall intervention in 2023 compared to 2022.[8] Second, divergence in merger control outcomes between the European Commission (EC) and the UK’s CMA on high-profile deals persists.[9] In 2023 for example, half of the 12 cases reviewed by both authorities, differing conclusions were reached.[10] These differences highlight the challenges of coordinating multinational transactions, as authorities may have distinct approaches to antitrust risks.[11]
Amid the UK government’s broader mission to drive domestic investment and economic growth, the CMA is set to review its approach to merger remedies in 2025. This will potentially entail moving away from its long-standing preference for structural solutions like divestitures in favor of behavioral remedies (i.e. commitments from companies to change their conduct without altering their market structure).[12] The CMA signaled this upcoming shift on 5 December 2024, when it accepted behavioral remedies for the first time in over four years in a mobile telecom merger.[13] Such change in how the CMA approaches merger remedies could potentially lead to it being more in alignment with the approach of the European Commission (EC).[14]
Supporting Competition While Addressing Barriers to Investment
The CMA emphasizes that competition is central to the Industrial Strategy.[15] Historical evidence demonstrates that increased competition leads to higher levels of innovation, productivity growth, and rising wages. In competitive markets, companies are driven to innovate, improve their products, and offer better value to consumers. The CMA stresses that diverse market structures—which include both large incumbents and emerging disruptors—are essential for sustained productivity improvements. At the same time, for businesses to flourish, they need more than just competitive markets. They need policy certainty, access to skilled workers, and high-quality infrastructure. The CMA recognizes that addressing barriers is crucial for unlocking investment.[16]
Sarah Cardell, CEO of the CMA recently discussed the CMA’s plan for 2025, which appears focused on balancing the role of major technology companies in driving innovation and investment while ensuring fair competition.[17] By designating certain companies with “strategic market status” under the Digital Markets, Competition, and Consumers Act, the CMA aims to regulate companies with substantial market power through stricter conduct rules. The goal is to allow these dominant players to continue driving innovation and investment in the UK economy, while ensuring they create space for smaller competitors to thrive. This approach suggests that the CMA intends to foster a competitive digital market that benefits both large and small players in the tech ecosystem.
Additional CMA Focus Areas in Supporting the Industrial Strategy
1. Targeting Growth-Driving Sectors
The CMA strongly supports the government’s emphasis on the key sectors identified for growth in the Industrial Strategy Green Paper.[18] Through its State of Competition Report,[19] which aims „to provide the best available information and analysis on competition and market power across the UK economy,”[20] the CMA provides valuable insights into where intervention is needed to ensure competition thrives in these sectors.
2. Strengthening Supply Chain Resilience
The CMA also focuses on supply chain dependencies, recognizing the impact of upstream market power on downstream markets. By analyzing these dynamics, the CMA seeks to identify vulnerabilities in supply chains that could impede economic growth.[21]
3. Creating a Pro-Business Environment
The CMA advocates for policies that encourage innovation across different types of market structures, particularly in industries where small and medium-sized enterprises (SMEs) play a crucial role. By ensuring that competition remains fair, even as businesses scale, the CMA aims to foster an ecosystem in which both large and small players can thrive.[22]
4. Addressing skills mismatches
The CMA highlights that a dynamic economy requires a well-functioning labor market.[23] As knowledge assets have become more important while barriers to the diffusion of knowledge across firms have also increased,[24] making policies that facilitate workforce mobility and address skills mismatches more crucial.[25] For example, evaluating the impact of non-compete clauses could improve labor market fluidity, enabling businesses to access the talent they need to innovate and grow.
Looking Ahead: Shaping the Future of UK Economic Growth
The CMA’s response to the Industrial Strategy Green Paper emphasizes the centrality of competition in fostering sustainable economic growth. Through its advisory and direct action roles, the CMA is committed to creating an environment where innovation thrives, investments increase, and consumers benefit from enhanced choices. As we approach the formal launch of the Industrial Strategy in Spring 2025, it is crucial for all stakeholders—including businesses, government bodies, and legal professionals—to work together to harness the power of competition in driving the UK’s future prosperity.
[1] United Kingdom Government, Invest 2035: The UK’s Modern Industrial Strategy – Green Paper, 08.10.2024, https://assets.publishing.service.gov.uk/media/6711176c386bf0964853d747/industrial-strategy-green-paper.pdf, hereinafter: UK Industrial Strategy.
[2] UK Industrial Strategy.
[3] Ibid.
[4] Ibid.
[5] Competition and Markets Authority (CMA), CMA Response to Industrial Strategy Green Paper: Summary, 21.11.2024, https://www.gov.uk/government/publications/cma-response-to-industrial-strategy-green-paper/industrial-strategy-green-paper-summary, hereinafter: CMA Response.
[6] CMA Response.
[7] Johnston, E., Long, D., Emanuel, L., & Tolley, L., Tougher merger control enforcement frustrates more M&A, Shearman & Sterling LLP, 28.02.2024, https://www.aoshearman.com/en/insights/global-trends-in-merger-control-enforcement/tougher-merger-control-enforcement-frustrates-more-ma.
[8] Ibid.
[9] Sakellariou-Witt, S., et al., Global merger control trends, White & Case, 08.02.2024, https://www.whitecase.com/insight-our-thinking/global-merger-control-trends.
[10] Johnston, E., Long, D., Emanuel, L., & Tolley, L.
[11] Ibid.
[12] Batchelor, B., Luoma, A., & Antoniou, I., CMA’s growth agenda: UK competition authority may loosen position on merger remedies, Skadden, 06.12.2024, https://www.skadden.com/insights/publications/2024/12/cmas-growth-agenda.
[13] Ibid.
[14] Ibid.
[15] CMA Response.
[16] Ibid.
[17] Harkavy, R., CMA to reassess merger strategy following Number 10 criticism, Global Legal Insights, 21.11.2024, https://www.globallegalinsights.com/news/cma-to-reassess-merger-strategy-following-number-10-criticism/.
[18] These are: Advanced Manufacturing, Clean Energy, Creative Industries, Defence, Digital and Technology, Financial Services, Life Sciences, and Professional and Business Services.
[19] Competition and Markets Authority (CMA), The State of UK Competition Report 2024, 24.10.2024, https://www.gov.uk/government/publications/the-state-of-uk-competition-report-2024, hereinafter: Competition Report.
[20] Ibid.
[21] CMA Response.
[22] Ibid.
[23] Ibid.
[24] Competition Report.
[25] CMA Response.
