Industrial Strategy to boost UK manufacturers in 2026

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Britain’s manufacturers believe the introduction of an Industrial Strategy and individual sector plans will have the largest impact on their growth prospects in 2026, with a majority of companies believing the opportunities for their business to succeed outweigh the risk according to a major survey published today.

The findings come from the annual Make UK 2026 Senior Executive survey, in association with PwC UK, which looks at the opportunities, risks and challenges for manufacturers in the year ahead, as well as the outlook for the UK and international economies. As well as the benefits from an Industrial Strategy and sector plans the survey shows that, despite the current challenges from rapidly escalating costs, a majority of companies believe that overall, the UK remains a competitive place in which to manufacture.

However, Make UK warned the survey also signals that the significant increases in business cost that manufacturers are facing, especially on employment and energy, are threatening to reach a tipping point whereby investment plans will be cancelled or shifted overseas.

Greater stability and clarity
In response, Make UK is urging the Government to speed up the pace of delivery on industrial strategy, as well as bringing forward the much-vaunted business energy support scheme and expanding it to cover the broadest possible range of companies. In addition, Make UK is calling for greater stability and clarity regarding future employment legislation and costs given the impact on recruitment of the increase in NICs and Employment Reform Bill.

Stephen Phipson, Make UK’s chief executive, said: “Manufacturers have demonstrated their resilience over and over again in recent years and those that remain innovative and are prepared to invest in new technologies, expanding markets and, most crucially, their people will continue to thrive. But, they can only do this if they are operating in the most favourable business environment and, despite the commitment to an industrial strategy, not only is growth anaemic but the warning lights are now flashing red on the UK as a competitive place to manufacture and invest. The Government promised significant change, now is the time to deliver it.”

Cara Haffey, leader of industrials and services at PwC UK, added: “The UK’s manufacturers are ambitious in their mission to drive growth. The Industrial Strategy is front and centre of this optimism but, it will take time to reap the rewards from its implementation. Nonetheless, the industry can’t afford to sit still. Those shifting their focus to product innovation, embracing technology and investing in marketing will be the winners in the battle for growth.”

Digital technologies, AI and automation
According to the survey, more than half of companies (57%) say a long-term Industrial Strategy and sector plans will have the biggest impact on growth this year, with almost two thirds (63%) saying they will bring forward investment in response. The top priorities for investment are new product development for four in five companies, with more than three quarters (76%) investing in digital technologies, artificial intelligence (AI) and automation.

More than half of companies (55%) are set to expand their product portfolio and four in 10 companies (42%) planning to export to new countries. The increased use of artificial intelligence (AI) in particular is linked to more than a third of companies (37%) saying their key area for growth is increased marketing of their business.

The biggest challenges companies face are significant cost increases across the board with almost 9 in 10 companies (86%) expecting increases in employment costs, a similar number (79%) seeing increases in material/input costs and two thirds (67%) business rates.

In response, Make UK warned that while some increases are a result of global factors, domestic employment and, other business costs, are threatening a tipping point whereby investment plans will either be cancelled or shifted overseas. As an indication of sentiment within the sector, almost two thirds of companies (60%) said they would have decreased or cancelled investment plans if business tax increases had taken place in the Budget, with a similar number (57%) they would have shifted investment overseas.

Furthermore, while more than half of companies (57%) believe the UK to be a competitive place to manufacture, more than a quarter (26%) view the UK as uncompetitive. In addition, an equal number of non-UK businesses view the UK as an unattractive location to invest (39%) compared to those who view it as an attractive destination (41%).