Britain’s manufacturing sector grew at its fastest pace in more than a year in December, offering tentative signs of recovery after a prolonged downturn. However, businesses are unsure about the year ahead, as the survey shows confidence dipping from November's nine-month high.
The S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) rose to 50.6 in December from 50.2 in November. That is its highest reading in 15 months, but below an earlier “flash” estimate — which uses preliminary data — of 51.2. A number above 50.0 denotes growth, while anything below that means contraction.
“The domestic market remained a positive spur to growth while new export business, despite having now fallen for almost four consecutive years, took a sizeable stride towards stabilising,” said Rob Dobson, director at S&P Global Market Intelligence, in a statement.
Driven mainly by domestic businesses, new orders increased for the first time since September 2024. Although export orders continued to fall, the drop was at one of the mildest rates in almost the past four years. Manufacturing output rose for the third month running, supported partly by stock-building and efforts to clear backlogs.
In the UK’s autumn Budget, finance minister Rachel Reeves had announced £26bn (US$35bn) of tax increases, but ended up delaying many of them. The resulting reduction of uncertainty in the sector, along with the resumption of production at Jaguar Land Rover after a cyber-attack temporarily shut down its factories in September, helped lift factory activity, S&P Global said.
The survey also showed that employment in the manufacturing sector remained weak in December, with job losses recorded for the 14th consecutive month, albeit at a slower pace. Measures of inflation also picked up, as manufacturers reported higher input costs that hit small and medium-sized producers the hardest, including labour costs linked to payroll taxes.
Despite the Bank of England’s interest rate cut coming up to the end of 2025, business optimism slipped in December for the first time in three months, according to S&P Global’s Dobson. Firms cited high costs, increased taxation, reduced international competitiveness, geopolitical uncertainty and government policy risks as key concerns.
He also said the start of 2026 would show whether growth could be sustained after the temporary boosts the sector experienced in December. “The base of the expansion needs to shift more towards rising demand and away from inventory building and backlog clearance,” he noted.