The government has created a £125 million fund to help major industries improve their supply chain systems and processes, and bring more business to the UK.

The government said the potential to stimulate new technologies and build stronger supply chains in the UK is "very considerable".

The Advanced Manufacturing Supply Chain Initiative aims to help existing UK supply chains grow and "achieve world class standards while encouraging major new suppliers to come and manufacture here", said the government. For example the Automotive Council, the joint industry-government partnership, has already identified over £1 billion worth of potential contracts which manufacturers would like to place in the UK.

Applications will be assessed by the Technology Strategy Board. The programme will complement other publicly funded schemes such as the Regional Growth Fund, Growth and Innovation Fund, Manufacturing Advisory Service and UK Trade and Investment to maximise its impact.

The new fund will support projects in established UK advanced manufacturing sectors such as aerospace, automotive and chemicals. It will also target newer growth areas where the UK is well placed to take a global lead, such as energy renewables and other low carbon sectors.

The competitive fund will invite applications early in the new year. Business secretary Vince Cable said: "Recent economic and natural shocks such as the ash clouds, tsunami and Japanese earthquake have shown the fragility of long distance and single source supply chains.

"I want to seize on the increased preference that big global companies are showing for co-locating key elements of their supply chains with their UK manufacturing operations. British suppliers have a lot to offer and we need to help them realise and develop their strengths and sell them on the international market."

John Cridland, CBI Director-General, said: "We welcome this new initiative which will help build UK supply chain capability and resilience. It will enhance our manufacturing competitiveness and build on strengths in advanced engineering, research and innovation.

"This initiative will help ensure we make the most of value chain opportunities in key sectors such as chemicals, food, automotive and aerospace."

Suppliers, including SMEs, will be encouraged to submit joint proposals that demonstrate potential to strengthen and provide better integration across whole supply chains. A threshold of £2 million for support has been set.

Last week the government set aside £158 million to invest in e-infrastructure "to power growth and innovation" in research centres. The government said "UK scientists and businesses will have access to the most sophisticated technology, keeping them at the cutting edge of research and development".