Briefing paper
Industrial Strategy and the Low Carbon Supply Chain Challenge
Sep 2024
Ahead of a new UK Critical Minerals Strategy later this summer, in this blog we look at how the UK government has developed its capacities in the space. What have been the most significant achievements since the first Critical Minerals Strategy in 2022? What are the main challenges the new strategy needs to address?
The UK has substantially strengthened its domestic and international capacities around critical minerals. An evolving geopolitical context, however, has upped the ante. Strategic action by the EU and US around critical minerals highlights the importance to the UK of both a comprehensive Critical Minerals Strategy and effective critical minerals ‘statecraft.’ Together, these need to (1) balance the vulnerabilities and opportunities of international economic interdependence; (2) deliver multiple domestic objectives, including rapid decarbonisation, economic growth and national security; and (3) be adequately and responsibly resourced.
‘Critical minerals’ refers to 34 raw materials that are particularly important to the UK‘s economy and energy transition, and for which there are global risks to supply. It signals a need for strategic action but does not prescribe what actions should follow. ‘Criticality’ highlights, in short, a need for strategy and statecraft, i.e., the use of political, economic and diplomatic means to achieve strategic objectives.
The UK Government’s capacity around critical minerals has developed rapidly in recent years. There is now a cross-Whitehall infrastructure around critical minerals that includes the Department of Business and Trade (DBT), the Foreign, Commonwealth and Development Office (FCDO), the Department of Energy Security and Net Zero (DESNZ) and the Cabinet Office, among others. Work accelerated after publication of the first critical minerals List (2021) and first Critical Minerals Strategy (2022). A Strategy Refresh (2023) established a Task & Finish Group to investigate the dependence of six industrial sectors on critical minerals. Government also launched a Critical Minerals Intelligence Centre (CMIC) in 2022, funded by DBT and housed within the British Geological Survey, to advise the government on the strategy’s delivery. CMIC subsequently developed a new criticality assessment using a revised methodology. It produced a significantly expanded critical minerals list in 2024, along with a series of in-depth Foresight Reports on the critical mineral requirements of energy decarbonisation technologies.
Internationally, UK pursues its interests in critical minerals through several multilateral forums, such as the G7, G20, IEA and IRENA. It joined the international Mineral Security Partnership (MSP) in 2021, which now includes an MSP Finance Network to facilitate co-financing of new projects. The UK also participates in the Conference on Critical Materials and Minerals, a low-profile non-ministerial grouping involving the UK, US, Canada, Australia, Japan, Italy and the EU. Several other UK multilateral initiatives – such as the Global Clean Power Alliance – have agendas that potentially include critical minerals supply chains.
The UK has recently stepped up its bilateral action on critical minerals. Back in 2023, a report by the Foreign Affairs Committee critiqued the government’s critical mineral approach. It urged government to define a ‘Team UK’ offer, outlining the UK’s strengths to global partners, and to map UK industry’s critical mineral vulnerabilities to a diplomatic agenda to develop bilateral relationships. In recent years, the Government has concluded nine agreements on critical minerals with South Africa, Saudi Arabia, Canada, Australia, Kazakhstan, Zambia, Japan, Mongolia and Indonesia. The UK has also secured related partnerships on clean energy, including the UK-China Clean Energy Partnership (refreshed in March 2025), and similar with South Korea and India. Official Development Assistance (ODA) funding has enabled modelling of Zambia’s critical minerals infrastructure, and a regional assessment of 14 sub-Saharan countries’ potential to move into critical mineral processing-refining. The Government’s export credit agency – UK Export Finance – now offers finance to overseas companies that provide UK industry with long-term off-take contracts for critical minerals. There are also ongoing efforts to target 3-4 countries for deeper collaborative partnerships around critical minerals.
The first Critical Minerals Strategy, produced by the previous Conservative government, came relatively late in the day and plugged a policy gap. It focused on accelerating domestic capabilities, collaborating internationally through trade and diplomacy, and enhancing minerals markets, but lacked key targets, implementation commitments, or new financial support. The practical limitations of this approach have become increasingly clear.
First, the geopolitical landscape around critical minerals continues to evolve, shaped by geoeconomic competition and the strategic manufacturing policies of China, US and EU. Trump’s ‘America First’ trade policy and wide use of tariffs highlight a process of international economic fragmentation, attenuated by the cross-border production networks of multinational corporations. The EU is also adopting policies to onshore industrial capacity, build technological sovereignty and achieve strategic autonomy in key sectors. From this perspective, critical minerals are not just issues of supply security: they are central to strategic manufacturing objectives and technological leadership. The EU’s Critical Raw Materials Act (CRMA), for example, adopts a notably muscular approach for ensuring “access to a secure, diversified, affordable and sustainable supply” of critical minerals. It identifies Strategic Projects for investment, sets targets for domestic production, and a maximum dependency threshold (65%) for imports from any single country. The UK’s ‘offer’ on critical minerals has to be substantial and differentiated if it is to be visible against this backdrop.
Second, China’s dominant position within multiple critical mineral supply chains – particularly in the midstream (mineral processing) part of the value chain – continues to be a cause for concern, although the problem of geographical concentration is wider than China alone: over 90% of niobium – ranked number 1 on the UK’s critical mineral list – is produced in Brazil. Global outsourcing strategies, adopted by firms in Europe and North America over previous decades, have contributed to this concentration of production. The growing use of export restrictions by countries producing critical minerals (e.g., China, Indonesia, Democratic Republic of Congo (DRC)), however, has increasingly brought the vulnerabilities of this model into sharp focus.
Third, the geopolitics of critical minerals are increasingly shaped by the ambitions of several other countries in relation to their (potential) position in the critical mineral value chain, such as Australia, Canada, Saudi Arabia, and Japan. Australia’s 2023-30 Critical Minerals Strategy, for example, seeks to maximise the ‘unmissable’ opportunity presented by Australia’s endowment of critical minerals by, for example, derisking key projects and attracting investment from ‘like-minded’ countries. It seeks international partnerships around innovation and downstream processing capability, and promotes Australia’s reputation as a reliable partner that can apply best-practice Environmental, Social and Governance (ESG) credentials.
Fourth, key targets of the UK’s new industrial policy – like advanced manufacturing, clean energy, foundational industries and defence – rely on access to critical minerals. The current build-out phase of the energy transition is materially intensive, with decarbonisation technologies like batteries, heat pumps, traction motors and wind turbines already driving demand for lithium, nickel, manganese, cobalt, graphite, copper and rare earth elements. The UK does not extract large quantities of these minerals (and is unlikely to), notwithstanding its exploration potential and the small number of extraction projects (mainly lithium) currently planned or in a pilot phase. The fact that the UK imports products and materials containing critical minerals presents opportunities for their recovery, re-use and reprocessing post-use, although these require careful evaluation to identify where the UK has a comparative advantage and how ‘circularity’ may be achieved through partnerships with other countries. Recent success in rare earth recycling and innovation could be replicated, potentially, to other critical minerals.
The ambition of the forthcoming strategy is to ‘move the dial’ around UK critical mineral capabilities. Success will depend in part on statecraft – the art of using economic, political and diplomatic means to achieve strategic ends. Three things will be key.
First, managing the multiple national policy objectives that intersect with critical minerals will test the limits of domestic statecraft. The cross-Whitehall structures around critical minerals that have developed in the last few years – which underpin development of the new strategy – are an asset, as are the significant capabilities of CMIC. But strategy implementation will require a granular level of support tailored to different parts of the UK critical mineral value chain, along with further innovation in support tools and methods. It will require prioritising some critical mineral value chains over others: an economic growth objective, for example, will target a different suite of minerals to rapid decarbonisation or long-term resilience. There are already calls for government to differentiate supply chains that contribute to the UK’s climate ambitions from those unrelated to net zero and this question, about what and who critical minerals are for, is likely to increasingly occupy statecraft.
Second, statecraft requires a clear-eyed view on what can be delivered domestically and what can only be achieved through international partnerships. Much of the concern about critical minerals centres on vulnerability arising from international supply chain risks – this is, after all, a key determinant of their listing as ‘critical’. But it is not realistic – neither technically nor commercially – to think the UK can go it alone and onshore international supply chains for critical minerals. Developing domestic capacities along the supply chain is an important strategic goal, but will nearly always be in the context of international trade and investment flows. The UK’s relationship with the EU illustrates how economic interdependence is an opportunity to address critical mineral security concerns. Much of the UK’s initial work on resource security and critical minerals was done as part of EU energy and raw material policy – for example, the EU’s Raw Materials Initiative (2008) and first Critical Minerals List (2011). In the context of the CRMA, however, the EU is now a significant competitor, and the policies and targets it adopts (e.g. on materials retention) have implications for the UK. Statecraft, in the form of diplomacy and regulatory negotiation – around trade, investment and wastes, for example – is going to be key to capturing these opportunities for the UK.
Third, the much-vaunted ‘soft power’ of UK statecraft abroad is undoubtedly useful in building alliances and partnerships, but it requires sustained focus and resources to back it up. The cut to the UK’s Overseas Development Assistance (ODA) budget – from 0.7% to 0.3% GDP – has reduced the capacity of an historically effective tool. More generally, the UK is significantly outgunned by other countries in the level of state financial support provided for critical minerals: it is the only G7 country without a dedicated critical minerals fund. The MOUs it has concluded on critical minerals are purposeful statements of intent, but much of the ‘action’ they anticipate lies in the private sector beyond the Government’s direct control. Resourcing and catalysing these aspirations will be key. This includes preparatory ‘in-country’ work with a diverse range of partners, including civil society organisations able to monitor the creation of ‘standards-based markets’ and promote engagement with workers, Indigenous Peoples and local communities.