Key points
The UK manufacturing scene is bouncing back, showing a notable surge in activity during the third quarter, as highlighted by the latest Make UK/BDO Manufacturing Outlook survey. This report indicates that the long-awaited investment demand is finally being unleashed, and companies are ramping up their hiring plans.
However, a new analysis from Make UK points out that the industry is still grappling with a significant challenge: filling 46,000 job vacancies, which is costing an estimated £4 billion in lost output each year.
Output and export growth boost sector confidence
After a few sluggish quarters, all the key performance indicators are on the rise, with export growth leading the charge in demand. The United States has regained its status as the second most appealing market for growth, bouncing back after dropping out of the top three in Q2 due to earlier tariff uncertainties.
The output balance has jumped to +25%, up from +9% last quarter, while total orders have climbed to +16%, recovering from a dip of -2% in Q2. Export orders have surged to +23% from +7%, and UK orders have increased to +12% from -1%.
Investment and hiring intentions have also seen a significant boost, with investment sentiment rising to +25% from just +2%, and recruitment intentions improving to +15% from +1% in the previous quarter. It's encouraging to note that 70% of manufacturers are planning to invest in technology and automation, reflecting a strong belief in long-term productivity improvements.
Cost pressures still a worry
Despite these positive trends, manufacturers are still facing tough cost pressures. Nearly 70% of firms anticipate further cost hikes in the upcoming Budget, and 68% have reported that their costs have risen more than they expected over the last six months.
As a result, 58% of companies have already raised their prices this year, and 53% are planning to do so in the next six months, indicating that inflationary pressures are still very much a part of the supply chain.
Growth forecasts remain cautious for 2025 and 2026.
Make UK has warned against jumping to conclusions that the recent rebound signals the beginning of a lasting recovery. They predict that the sector's output will dip by 0.1% in 2025 and 0.6% in 2026, highlighting the ongoing uncertainty in global markets.
Industry leaders are calling on the government to keep supporting the sector.
Stephen Phipson, Chief Executive of Make UK, acknowledged the positive rebound but urged a cautious approach:
“While these figures are a promising indication that manufacturers are regaining confidence and driving growth and investment, we must remember that one good result doesn’t guarantee a trend. With UK and European markets still sluggish, it wouldn’t take much to disrupt this progress.
It’s crucial that the concerns manufacturers have about potential extra costs in the upcoming Budget don’t come to fruition. The Government has made significant progress in backing the industry through its Industrial Strategy, and it’s essential that they don’t introduce measures that could hinder economic growth.”
Richard Austin, Head of Manufacturing at BDO, shared similar thoughts:
“These results provide a flicker of hope for UK manufacturing. Even after a tough year, businesses have managed to ramp up output and boost investment.
However, this positive momentum might not last long. The forthcoming Autumn Budget will be pivotal in deciding whether manufacturers will keep investing. The Government needs to seize this chance to reaffirm its dedication to the sector and follow through on the commitments made in the Industrial Strategy.”
