Rising prices are pushing UK producers dangerously near an funding tipping level, with companies warning that deliberate spending may very well be cancelled or moved abroad except pressures ease.
A brand new survey by Make UK, the manufacturing commerce physique, discovered that just about 9 in ten business leaders anticipate employment prices to rise this yr, whereas two thirds anticipate increased power payments. The findings underline mounting concern that the price base for British manufacturing is changing into unsustainable.
The survey of 174 senior manufacturing executives revealed that 65 per cent see rising enterprise prices as one of many greatest dangers going through the sector in 2026. Make UK warned these pressures at the moment are “threatening to succeed in a tipping level”, past which companies could also be compelled to cut back funding or relocate exercise overseas.
Confidence within the UK as a spot to speculate stays fragile. Simply over 4 in ten producers imagine Britain is a gorgeous vacation spot for funding, a view shared by the same proportion of overseas-owned companies working within the UK. Towards this backdrop, Make UK forecasts the manufacturing sector will shrink by 0.5 per cent this yr.
Regardless of these issues, the survey additionally revealed pockets of cautious optimism. Almost two thirds of respondents mentioned they imagine alternatives will outweigh dangers over the yr forward, whereas 57 per cent nonetheless regard the UK as a aggressive place to fabricate.
Enterprise leaders pointed to the federal government’s industrial technique as a optimistic affect, with 63 per cent saying it had improved confidence about future funding prospects. Nevertheless, enthusiasm is being tempered by fiscal uncertainty.
The newest autumn finances drew explicit criticism, with greater than half of producers saying they’d have decreased deliberate funding had further enterprise tax rises been introduced. Executives warned that additional will increase in taxation or employment prices may shortly undermine confidence.
Stephen Phipson, chief govt of Make UK, mentioned the sector was sending a transparent warning to authorities.
“Regardless of the dedication to an industrial technique, development stays anaemic and the warning lights at the moment are flashing pink on the UK as a aggressive place to fabricate and make investments,” he mentioned. “The federal government promised vital change – now’s the time to ship it.”
The issues come as broader enterprise sentiment throughout the UK financial system weakens. A separate survey from accountancy agency BDO discovered that general optimism amongst companies fell to its lowest degree in virtually 5 years on the finish of 2025.
BDO’s sentiment index dropped from 93.45 to 90.01 in December, the weakest studying since January 2021, reflecting fears of a slowing jobs market, weak demand and chronic value pressures. Confidence declined throughout each manufacturing and companies companies.
“Enterprise prices are rising and turnover expectations are falling,” mentioned Scott Knight, head of development at BDO. “Decisive motion, reminiscent of additional rate of interest cuts and a transparent roadmap of what lies forward, is crucial if companies are to develop and make investments.”
Whereas BDO’s output index edged increased, indicating modest development, this was pushed fully by the companies sector. Manufacturing exercise continued to lag, with employment prospects additionally softening barely.
Collectively, the surveys paint an image of an business underneath pressure: hopeful that coverage route is bettering, however more and more involved that rising prices and uncertainty may choke off funding simply as producers are being requested to drive financial development.
