The current economic model is exhausted – it’s time to focus on production, skilled work and industrial investment, argues Costas Lapavitsas.

Andy Burnham’s expected ascent to the Labour leadership marks the definitive end of the Starmer-Reeves economic model. The argument that Britain’s problems are primarily issues of distribution—requiring better regulation, fairer taxes, and more competent management of the existing settlement—is exhausted.

The emerging “Manchesterism” agenda, which rightly seeks to bring foundational utilities and transport back under public control, is a necessary and welcome advance. But we must be honest about where it stops. Its central claim is that cheaper energy, transport and housing will unlock productive dynamism. It assumes that a functioning productive economy exists in the British economy’s middle and upper tiers, waiting to be unlocked by cheaper, de-commodified public provision.

That assumption does not hold. Our crisis of provision is fundamentally a crisis of production.

The reality of British capitalism is not simply that it does not distribute wealth fairly but that it has actively shifted its model of accumulation away from manufacturing and other material production toward services, especially finance. The City of London became one of the principal beneficiaries of the emergence of a financialised economy.

De-commodifying utilities is not enough to reverse this. Britain cannot create prosperity, reduce inequality, or regain genuine economic sovereignty without a deliberate, state-led strategy of reindustrialisation.

This has nothing to do with nostalgia for some mythical past. Modern manufacturing is built on advanced engineering, automation, digital technology and clean energy. It remains the sector where productivity rises most consistently, innovation spreads across the economy and skilled employment creates prosperity far beyond the factory gate. Despite what financial circles habitually claim, there is no evidence that an advanced country can achieve sustained prosperity without a strong manufacturing base. Britain will not be the first.

A radical Labour government must therefore pursue an industrial strategy built on three institutional pillars.

First, Britain needs a wave of public investment, backed by a properly capitalised National Investment Bank, that can direct long-term capital into energy, transport, and industrial supply chains. This requires a break from the neoliberal language of the state absorbing the risks so that private capital can extract the yields. A dynamic programme of public investment must be tied to public equity stakes, ensuring the steady rebuilding of public wealth.

Furthermore, public investment must be shielded by an active trade policy. We must use the regulatory space we now have outside the EU single market to deploy domestic content requirements in public procurement, carbon border taxes, and anti-dumping measures. We must also protect emerging British supply chains from subsidised overseas competition. There is no point renationalising our railways if the rolling stock is still built in Spain or Japan.

Second, Britain faces acute shortages of engineers, technicians and skilled manufacturing workers across sectors ranging from defence to renewable energy. Skilled workers are created through apprenticeships, technical education, stable employment and collective bargaining. Without rebuilding the foundational skills of the British working class—welders, precision engineers, technicians—industrial policy will remain a Whitehall fantasy.

Trade unions can play a crucial role in rebuilding our skilled labour force. Unions are not simply a political constituency to be managed or a passive beneficiary of better public services. Organised labour is a mechanism for economic reconstruction and ought to be granted institutional power. This means legally mandated sectoral collective bargaining to coordinate wages across expanding industries, ensuring that productivity gains are broadly shared rather than captured by a tiny elite. It also means statutory union representation on the boards of all new public corporations and the National Investment Bank.

Third, rebuilding the productive base will inevitably bring the government into direct conflict with mobile financial capital. We cannot politely ask the financial system to pivot toward manufacturing. The Bank of England must be fundamentally repurposed and oriented to serve a national industrial strategy. Crucially, Labour must also overcome its fear of the bond markets. The City of London will inevitably retaliate against a genuine industrial strategy by generating pressure on gilt yields and sterling. Surviving this political intervention will require the readiness to use targeted capital controls to prevent speculative capital flight. A leadership that cannot articulate a credible strategy to defend its economic programme from the City has not yet come to terms with the realities of power in Britain.

The strategy of simply seeking better management of our current economic model has come to an end. Labour can now offer something fundamentally different by rebuilding Britain’s productive economy. If the party puts production, skilled work and industrial investment at the heart of its programme, it will create the conditions for stronger public services, rising living standards and a more equal society. This is what the country is calling for. Without sustained rebuilding of wealth creation, every promise of renewal will rest on fragile foundations.

Costas Lapavitsas is a Professor of Economics at the School of Oriental and African Studies, University of London. He was elected as a member of the Greek Parliament for Syriza in January 2015, subsequently joining Popular Unity later that year. The above arguments are developed in greater detail in Reindustrialise Britain: A Strategy for Wealth Creation, co-authored with Larry Elliott and Doug Nicholls (Polity, September 2026).

Image: https://commons.wikimedia.org/wiki/File:Andy_Burnham_on_13_August_2024_%28cropped_2%29.jpg Source: https://www.flickr.com/photos/26320652@N02/53921141434/ Author: Scottish Government, licensed under the Creative Commons Attribution 2.0 Generic license.