The final manufacturing PMI for December on the back of an increase in November confirmed that at long last the UK manufacturing sector can look forward to 2026 with modest, albeit patchy, confidence. Although the financial pressures remain namely on rising wage bills and fuel costs this has finally been outweighed by a significant uptick in demand particularly from the UK.

It’s not all sweetness and light though with our clients reporting expecting little or new hiring in the sector in 2026 and instead looking to find ways to work more efficiently, often by automating or improving their processes. Government measures, such as the confirmed increase to the minimum wage, alongside the impact of the salary sacrifice cap, are making businesses cautious about hiring new staff.

Where the government could help in 2026 is by focusing their energy on clear political support for an Industrial Strategy, given the sector needs support to tackle issues like skills, productivity, and competitiveness, and to encourage growth and investment for the future.

The need to maintain that improvement in UK demand is vital for manufacturing’s prospects in 2026 given the path ahead for global trade is not expected to get any easier. Manufacturers face ongoing pressure from tariffs and complex trade challenges, particularly concerning critical relationships with the EU and US. This persistent geopolitical uncertainty and risk will encourage many businesses to reconfigure their supply chains with more near-shoring or reshoring of production capacity.