Firstly, can I say that I know they are in vogue, but I really detest this trend for "sanity" titled threads. People in the past weren't stupid or close-minded or opposed to change any more than they are today, and I think its unfair to imply that the decisions they made in the past lacked sanity just because we have the benefit of 20:20 hindsight today.
It's a huge, society changing, alteration in policy. One that would take decades to implement. The NE movement started in ~1899, far too late to make the changes necessary in time for WW1.
Yes. This. A million times this. I know I've said this before in threads that touch on this subject, usually those started by the OP here, and I'm sorry if I sound like a broken record. But Edwardian Britain was both a hotbed of radical ideas AND one of intense social, political, economic, and fiscal conservatism. Changes like these would be dramatic and difficult - just look at the OTL opposition to the People's Budget. You can't just restructure the Liberal Party (and what happens to the non National Efficiency supporting wing of the party? Do they just vanish?) and hope for the best. You need to take the social and political context into account.
In order to answer the OP's question, you need to look at
why Britain OTL was seemingly content buying these goods from overseas. It isn't simply a lack of national zeal or inadequate technical expertise in the UK, but also to do with the costs and contours of the Free Market economy of Britain at the time. You need to remove the cost-effective and easy nature of buying, say, all your optical equipment from Germany and that is fundamentally related to the free market. A state-owned armaments industry is a rational proposal in hindsight, but wasn't really that realistic in the context of an Edwardian Britain deeply sceptical of state involvement in the economy.
Moreover, if there was change it would have to take place in Britain itself. The idea that the UK at the time would invest in building up industry in the colonies is dubious - not only would the investment be harder, requiring better infrastructure than already existed in the UK itself, but many of the colonies lacked a technically-educated mass population base for such industrial productions. OR were only just beginning to build it up in significant numbers.
In many ways the R&D you are looking for was not just lacking in the UK, but was in no way industry standard throughout the world. You're asking for a seismic change without providing any idea of
why it might happen beyond government policy. Just reforming education and churning out more technically trained young men doesn't guarantee a transformation in British Industry at the time because it doesn't change economies and work cultures. In the railways, for example, like in many industries young men were hired and
internally trained and there was great suspicion of men who came in from outside. Changing that culture would be much harder - it persisted in many cases into the 1950s and 1960s OTL.
As I've said before, just chopping and changing a Liberal line-up on the Front Bench won't help (and that's assuming they stay in power whilst pushing through all this radical policy, which is a big
IF). The problems you identify in Britain are socially and culturally rooted in the period and much harder to change.