In a blow to the government’s plans to boost employment, eight sectors previously identified as having high growth potential in Labour’s industrial strategy have suffered job losses, according to a report seen by City AM.

The so-called IS-8 sectors, which include life sciences, financial services and defence, were singled out by the UK government last year as having the “greatest potential for growth”. The previous government’s industrial strategy, which has been adopted by Andy Burnham’s government, aimed to create 1.1 million new jobs by 2035, led by IS-8 sectors.

However, an annual report by the former Department of Business and Trade, which has since been renamed, found that job numbers fell across 2025 compared with the year before.

The department’s annual report on the industrial strategy’s performance found that employment fell by 0.6 per cent in 2025 compared with 2024.

Shadow business secretary Andrew Griffith said the figures were “damning” given the eight sectors were being depended upon to drive job creation.

“Labour has been devastating to industry – their jobs tax has made hiring more expensive, their Employment Rights Act has made hiring a legal minefield, and Ed Miliband’s ideological war on affordable energy has left British industry paying some of the highest electricity prices in the developed world,” the Conservative frontbencher said.

“Labour should stop the deindustrialisation of Britain by adopting our cheap power plan, cutting the taxes that punish employers, and by stopping treating British business as a cash machine.”

Labour’s struggles with jobs market

It was also found that some sectors, including defence and life sciences, only have “partial coverage” in official statistics, as some areas in data collection may overlap. It suggests that the government is unable to obtain a fully accurate picture of employment and business performance across the sectors.

The pattern of job losses in the UK’s high-growth industries comes against a broader weakening in the labour market, with the unemployment rate rising from mid-2024 to 4.9 per cent, or around 200,000 more people out of work. That makes the industrial strategy’s sector-by-sector data more politically sensitive, because these are the areas ministers have pointed to as a source of future hiring.

Employers widely blamed former Chancellor Rachel Reeves’ £25 billion tax increase via employers’ national insurance contributions for troubles across the UK jobs market.

Analysis of performance metrics on the industrial strategy also found that productivity had jumped across the eight sectors by 3 per cent, while both goods and services exports were higher.

The government also identified just 26 large domestic businesses that were part of the IS-8.

The first round of 10 annual reports on the eight growth sectors, however, point to the difficulties faced by business secretary Jonathan Reynolds in boosting the private sector and delivering the industrial strategy.

Some sectors within the IS-8, such as professional services and creative industries, have also been flagged by leading economists as being at risk of an AI jobs cull. The OECD recently suggested that London was set to suffer more from AI’s impact on the jobs market, in part because of its strength in professional and financial services jobs.

A government spokesperson said: “Our industrial strategy is designed to give certainty and stability to companies, and our latest report confirms it’s working.

“The UK has attracted around £380bn of private investment since its launch last year, and Skills England estimates there could be over a million more priority jobs by 2035 in certain sectors.”