The UK’s New Critical Minerals Strategy Represents a Comeback for Industrial Policy

Amid all of the excitement surrounding the British leadership contest, another, major – if less dramatic – development in the UK risks having slipped through the cracks of public attention. Last week, the UK government launched its first ever critical minerals strategy.

As the clean energy transition accelerates, demand for critical minerals – rare earths for powerful permanent magnets, lithium and cobalt for batteries, and silicon and tin for electronics, among others – is soaring. But their supply chains are volatile, complex and often tainted by environmental degradation. Just a few countries, namely China, dominate production. For example, in 2021, China accounted for about 75 percent of the world’s lithium oxide and hydroxide exports; rising demand for lithium has caused prices to increase nearly 400 percent year-on-year.

The UK government is now demonstrating that it is ready to move, and in lockstep with our allies, in setting out the steps to maximize what the UK produces across the value chain and to reduce our strategic dependence on China.

In a policy brief last year, the China Research Group called for the UK government to publish a critical minerals strategy centered around resilience. With the production of critical minerals expected to rise by as much as 500 percent by 2050, the UK government is now demonstrating that it is ready to move, and in lockstep with our allies, in setting out the steps to maximize what the UK produces across the value chain and to reduce our strategic dependence on China.

The UK boasts a limited number of critical mineral deposits, stretching from the Scottish Highlands down to the south coast. Part of the government’s plan is to ensure that those are appropriately leveraged; to maximize what the UK can produce domestically by collating geoscientific data for further exploration, including possible extraction from coastal waters. However, the fact of the matter is that the UK is and always will be a net buyer of minerals. The good news is that we have partners – the US, Canada and Australia – who can all be sellers.

The new strategy also promises to build on the UK’s existing skills base and invest in crucial research and development to unlock new market opportunities. It will see the creation of a Critical Minerals Intelligence Centre (CMIC) to provide policymakers with up-to-date data and analysis on supply, demand, and market dynamics.

This effort includes a major emphasis on the recycling and reuse of materials to create a more circular economy, reducing waste and pollution, as well as pressure on primary supply. The UK government has pledged state funding mechanisms to reduce the risk for investors and to make the City of London “the world’s capital of responsible finance for critical minerals.”

There is, of course, still work to be done on implementation. We must ensure that we follow through on our proposals and that British government-backed refineries and gigafactories are viable. In mining materials from third countries, we must not fall into the trap of outsourcing the same labor abuses and environmental damage that we have accused Beijing of enabling. And this must be a multilateral effort: it is imperative that we team up with experienced, reliable international allies to integrate supply chains and meet our production targets.

More broadly, the UK’s new critical minerals strategy – introduced by the Department for Business, Energy & Industrial Strategy (BEIS) – should not be viewed in isolation. This is just one step, if a critical one, in the larger effort to confront China’s challenge.

More broadly, the UK’s new critical minerals strategy – introduced by the Department for Business, Energy & Industrial Strategy (BEIS) – should not be viewed in isolation. This is just one step, if a critical one, in the larger effort to confront China’s challenge.

Both of the current leadership candidates have been vocal this week about the threats to British interests and values posed by the Chinese Communist Party (CCP). The UK is beginning to wake up to the fact that whilst we have tended to view geopolitics and business as largely separated, the Chinese government views them as two sides of the same coin.

Over the past year, the UK has made major strides in responding. We have seen the introduction of the National Security and Investment Act, giving the government the power to intervene in transactions that have the potential to harm our economic and national security. Just last week, Business Secretary Kwasi Kwarteng stopped Beijing Infinite Vision Technology Co. from acquiring vision sensing technology from the University of Manchester.

Blocking the takeover of our largest semiconductor foundry, Newport Wafer Fab, by a Chinese-owned company will signal that we are taking the issue seriously.

Building resilience is also about addressing the risks of single sourcing from China. Every government department should have a strategy which reduces dependence on procurement of goods and services from China. At the height of the COVID-19 pandemic, we saw the ramifications of being overly reliant on a single authoritarian state for PPE. The China Research Group has continued to raise the human rights and national security risks of Hikvision’s monopoly on surveillance cameras in UK government departments, universities, and hospitals.

And these efforts must extend beyond national borders. When it comes to building resilience, the UK cannot go it alone. A new administration should prioritize working with allies to secure supply chains and protect tech advantages, signing up to cooperative schemes such as the EU-US Trade and Technology Council.

Leadership candidates have committed to positioning the UK as the driving force behind the creation of an “economic NATO.” The UK is now thinking earnestly about diversifying supply chains, leading a support mechanism with like-minded allies for when Beijing tries to pick off individual nations, as we have seen with Lithuania and Australia.

Our priorities are beginning to reflect the areas where the CCP has the most potential to undermine Britain’s future prosperity. Fortunately for us, the decision of whether we want to equip ourselves properly to succeed in countering and competing with the CCP remains in our hands.

British industrial policy is making a comeback in response to the defining geoeconomic and geopolitical challenges of our times. It will likely be here to stay.

Chris Cash is the Research Lead at the UK parliamentary China Research Group. The CRG was set up in 2020 by a group of British MPs to consider the longer term challenges and opportunities associated with the rise of China and its industrial and diplomatic policies. Prior to joining the CRG, Chris spent two years working with the British Council in Hangzhou, China.

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