Activity in UK’s embattled manufacturing sector hits 15-month high
The UK’s embattled manufacturing sector took another small step towards recovery at the end of 2025 thanks to an influx of new orders.
The latest UK Manufacturing Purchasing Managers’ Index (PMI) from S&P Global UK hit a 15-month high as the industry continued to grow for the second consecutive month.
The PMI reading hit 50.6, up from 50.2 in November but below the previous flash estimate of 51.2.
Still, both readings remained above the all-important 50 mark, which indicates whether a sector is growing.
Confidence rose in December, driven by improving operating conditions: output and new orders rose, and suppliers’ delivery times lengthened.
But this was slightly offset by declines in stock purchases and employment, albeit to a lesser extent than in November.
“UK manufacturers benefited from several reduced headwinds towards the end of the year, as the negative impacts of the uncertainty surrounding the Autumn Budget, tariffs and the JLR cyber-attack all moderated,” Rob Dobson, director at S&P Global Market Intelligence, said.
Manufacturers sounded the alarm ahead of Rachel Reeves’ second Autumn Budget, warning the industry faced a make-or-break moment as tax speculation ran rife.
Make UK – the sector’s industry body – warned of an “existential threat” to the survival of many companies due to the rising price of industrial electricity prices.
The industry was also devastated by the cyber attack on Jaguar Land Rover, which forced the firm to halt car production.
The attack is estimated to have cost the UK around £1.9bn, with research from the Cyber Monitoring Centre (CMC), a non-profit group that tracks major cyber incidents, revealing that nearly 5,000 organisations were caught in the fallout.
The restart of production and the avoidance of major tax raids handed the sector a major boost, helping supercharge supply chains across the country.
“The start of 2026 will show if growth can be sustained after these temporary boosts subside,” Dobson said.
Manufacturers’ confidence takes hit
The UK’s domestic market powered manufacturing growth, with intakes of new work from overseas falling for the 47th successive month in December.
But Dobson warned that for continued growth, the “base of expansion needs to shift more towards rising demand and away from inventory building and backlog clearance”.
Despite the positive headline uplift, manufacturers surveyed in the PMI expressed nervousness for the year ahead.
Business optimism fell for the first time in three months in December, with manufacturing employment decreasing – at a slightly slower rate – for the fourteenth month running.
“Manufacturers reported they remain concerned about high costs, increased taxation, reduced international competitiveness, geopolitical uncertainty and the possible impact of Government policy,” the PMI said.
Make UK has warned of the consequences of the government’s Employment Rights Bill and inheritance tax raid on family firms on the industry.
Over the last few months, Labour has made significant U-turns on both policies, with a concession on day one rights following the Employment Rights Bill ping-ponging between the Lords and the Commons.
In late December, Labour handed farmers an early Christmas after increasing the Agricultural and Business Property Reliefs threshold to £2.5m from £1m.