Britain’s manufacturing sector has staged a notable recovery in the third quarter of the year, with fresh signs that previously delayed investment is now being unlocked. Recruitment intentions have also strengthened significantly, reflecting renewed confidence across the industry. However, new analysis from
Make UK reveals that the sector’s inability to fill 46,000 current vacancies is costing manufacturers an estimated £4 billion in lost output annually.
The latest Make UK/
BDO Q3 Manufacturing Outlook survey paints a more optimistic picture than previous quarters, with all key indicators showing improvement. Export growth has been particularly strong, helping to drive demand across the board. Furthermore, the USA has regained its position as the second most favoured market for growth prospects, having dropped out of the top three global blocs in the second quarter for the first time in the survey’s history due to tariff uncertainties.
Howevery, despite the more positive outlook, manufacturers still remain cautious. The survey shows that 70% of companies expect further cost increases in the forthcoming Budget, at a time when cost pressures are already acute. Over two-thirds (68%) of firms reported that their costs have risen more than anticipated over the past six months and as a result, 58% have had to raise prices this year, with 53% planning to do so within the next six months — clear evidence that inflationary pressures remain embedded in the sector.
Make UK has cautioned against interpreting the Q3 rebound as the beginning of a sustained upswing. Growth forecasts for the sector remain subdued, with output expected to decline by 0.1% in 2025 and by a further 0.6% in 2026. Stephen Phipson, Make UK’s chief executive, said: “After a period of considerable uncertainty in global markets, these figures are an encouraging sign that manufacturers’ confidence is improving and, more importantly, being translated into growth and investment. However, one swallow doesn’t make a summer, and with UK and European markets in particular remaining anaemic it wouldn’t take much to knock prospects for further growth.”
Boosting economic growthHe continued: “It is therefore essential that manufacturers’ fears of further costs as a result of the forthcoming Budget aren’t realised. The Government has made great strides in backing manufacturing with its industrial strategy and it must avoid imposing any further cost burdens which will hamper its number one mission of boosting economic growth.”
Richard Austin, head of manufacturing at BDO, added: “These latest findings offer a glimmer of hope for the manufacturing sector. Despite what has been a relentless year by all accounts, manufacturers have somehow boosted their output and doubled down on their investments to match.”
He concluded: “But this reprieve could be short lived. The spectre of the upcoming Budget looms and the sector will need robust signalling from the government that their investments are worth the risk. All eyes will be on the Autumn Budget and it is vital that the government seizes this opportunity to prove their commitment to the sector and to the promises made in the Industrial Strategy.”
According to the survey, the balance on output rose to +25% from +9% in the previous quarter, with total orders climbing to +16% from -2%. Export orders surged to +23% from +7%, while UK orders recovered to +12% from -1%. Recruitment intentions saw a marked improvement, rising to +15% from +1%, and investment intentions jumped to +25% from +2%, suggesting that pent-up investment demand has finally been released. Encouragingly, 70% of companies indicated plans to invest in technology and automation — an area seen as critical to long-term competitiveness.