Made in the UK

We highlight forecasts, drivers and challenges for the UK economy and its manufacturers.

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The UK’s manufacturing sector directly employs around 2.6 million highly skilled people across the UK, and manufacturers pay salaries typically 12% above the regional average, according to Make UK, the manufacturers’ organisation,

Small and medium-sized businesses are the backbone of the UK economy. There are 250,000 active manufacturing businesses in the UK, with 99% of these micro and small to medium companies. Almost two-thirds (64%) of these SMEs have the ambition to grow into large businesses which, according to Make UK, could deliver £83 billion to the UK’s manufacturing GVA over the next decade (with the right support).

However, UK manufacturers are grappling with challenges such as skills shortages, NI increases, high energy costs and Brexit-related barriers to trade. Recent geopolitical upheaval globally (U.S. trade tariffs, Russia’s invasion of Ukraine etc.) has also led to increased uncertainty in manufacturing markets. 

UK manufacturing forecast

Britain’s manufacturers have hit the brakes on recruitment and investment plans amid rising employment taxes and business costs, according to Make UK and BDO’s Q1 2025 Manufacturing Outlook report. 

“The report reveals that the final quarter slump in business confidence in 2024, the fastest rate of decline since the COVID-19 pandemic, has now translated into a fall in both output and orders in Q1 2025. It is the first time in a decade that output has fallen in the first quarter of the year, as both domestic and export orders have slowed. In response, half of companies have frozen recruitment efforts, with more than a quarter considering redundancies. A third of companies have also delayed investment plans,” said industry trade body, Make UK.

These factors led Make UK’s economics team (on 17 March 2025) to downgrade manufacturing sector growth forecasts for this year, with an expected contraction of -0.5% in 2025, down from the previous forecast of -0.2% in the last quarter, before growing by 1% in 2026.

To read the rest of this article in the June 2025 issue of ISMR, see https://joom.ag/Rqsd/p34