Manufacturing Outlook 2025 Q4
15.12.2025
The final edition of Manufacturing Outlook in 2025 - in partnership with BDO - reveals that manufacturers are closing the year on firmer ground, with output growth holding positive and UK orders strengthening.
Export demand also increased this quarter, though a sharp fall is expected early next year. With Q4's report also revealing that recruitment intentions weakened amid Budget uncertainty, and business confidence dipped for the second quarter running.
Key findings at a glance
Output growth: Activity stays positive, driven by stronger domestic orders.
Orders: UK and export orders rise, but exports forecast to drop in Q1.
Investment: Investment intentions remain optimistic.
Recruitment: Hiring plans fall sharply due to concerns over future costs.
Confidence: Business confidence continues to soften.
Outlook: Growth set to remain weak, with output up just 0.5% in 2025 and a contraction expected in 2026.
A £670bn Investment Opportunity
New Make UK analysis highlights the potential uplift if UK investment matched OECD levels by 2035.
Raising investment intensity from 17% to 22% of GDP - just a 0.5% annual increase - could unlock £670bn in additional public and private investment over the next decade.
What this means for manufacturing
- Manufacturers could benefit from around £44bn in extra investment.
- Increased investment would support productivity, innovation and long-term competitiveness.
The sector ends the year with encouraging momentum, but fragile confidence, labour concerns and expected export weakness mean growth is likely to remain subdued into 2026.
After a difficult twelve months when manufacturers have faced multiple challenges across all fronts, it’s a relief to see the year ending on a more positive note. However, the prospects for any form of significant growth remain remote and, with rising employment costs and any help on energy still well over the horizon, companies will have little inclination to fill up the punch bowl to start the party.
“It’s now essential that Government brings forward the proposed energy support scheme and at the same time, extends it right across the sector so the broadest possible range of companies are covered. With firms set to take a hit on increased employment costs including National Living Wage rises, employers want to see reassurances from Government that the upcoming Employment Rights Bill will not add further financial burdens on businesses, otherwise the jobs market will remain weak.
This year has been a volatile one for UK manufacturers. Whilst the last six months have shown tentative signs of growth in output and orders, the sector is lacking the confidence and assurance they need to put their hands in their pockets and invest.
“Last month’s Budget gave manufacturers some relief in terms of investment, green transition and some positive skills measures but it fell short in addressing some of the biggest concerns the sector is facing. Businesses need decisive action if growth is to be realised.
