Britain’s manufacturers have ended the year on firmer ground, with output growth remaining positive thanks to a solid performance in domestic orders. That’s according to the Q4 Manufacturing Outlook survey released today by Make UK and BDO.

Yet despite the uplift, the sector faces ongoing challenges. Recruitment intentions have dropped sharply, reflecting pre-Budget uncertainty and concerns around future tax and labour costs. Business confidence has now declined for a second consecutive quarter. And while the year closes on a more hopeful note, Make UK and BDO caution against reading too much into short-term gains, with the sector expected to grow by just 0.5% in 2025 before contracting by -0.5% in 2026.

£670bn prize for matching OECD investment levels

Alongside the survey, Make UK has released fresh analysis showing the potential gains if the UK were to match the OECD average for public and private investment by 2035. Between 2013 and 2024, the UK’s investment intensity averaged 17% of GDP, compared with 22% across the OECD.

Raising UK investment levels by just 0.5 percentage points each year could unlock £670bn in additional investment over the next decade. Based on current projections, 60% of this would come from the private sector—of which manufacturing is expected to contribute 11%, equating to £44bn in additional investment by 2035.

Expert commentary

James Brougham, Senior Economist at Make UK, said:

“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, employers also 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.”

Richard Austin, Head of Manufacturing at BDO, added:

“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.”

Survey snapshot – Q4 2025 highlights

• Output: Slipped to +13% (from +25% in Q3), but expected to rise to +19% next quarter

• Orders: Fell to +3% (from +16%), though forecast to rebound to +19% in Q1

• UK vs Export Orders: Both stood at +20% in Q4, but diverging forecasts see UK orders rising to +27%, while export orders drop to just +3%

• Recruitment: Hiring intentions fell to +3%, down from +15%

• Investment: Eased slightly to +19% (from +25%), but remains above long-term averages

• Export Markets: The United States has dropped to third place in perceived growth potential, behind Asia & Oceania, suggesting UK firms are continuing to pivot away from the US following tariff concerns

The Q4 Manufacturing Outlook survey captured responses from 263 manufacturers between 27 October and 20 November 2025.