- Nearly one in 10 manufacturers have already shifted production overseas, with more considering similar moves.
- One in 10 firms believe they could become insolvent within the next year.
- Manufacturers say high energy costs are threatening jobs, investment and the future of UK industry.
Britain's manufacturing sector is facing growing pressure as high energy costs and rising business expenses push companies to move production overseas, cut investment and reduce jobs, according to a new survey from industry body Make UK.
The latest Manufacturing Outlook report paints a challenging picture for UK manufacturing, with concerns mounting over deindustrialisation and the long-term competitiveness of British industry. Make UK warned that the country risks becoming an economy with an industrial strategy but without a sufficiently strong industrial base to support it.
According to the survey, 9 per cent of manufacturers have already moved part of their production abroad because of rising costs, while a further 16 per cent are considering doing the same. The findings suggest that around a quarter of manufacturers are either relocating operations overseas or actively weighing that option.
Factories feel the squeeze
Energy costs remain at the centre of the industry's concerns.
Almost half of manufacturers, 46 per cent, reported a further increase in energy bills since the start of the conflict in the Middle East. Around six in 10 companies said they had passed those higher costs on to customers.
Manufacturers argue that UK electricity and gas prices remain significantly higher than those faced by competitors in Europe and the US, leaving British firms at a disadvantage. According to Make UK, rising energy bills have been compounded by higher employment costs, including changes to National Insurance contributions and related business expenses.
Stephen Phipson, chief executive of Make UK, reportedly warned that Britain faces deindustrialisation unless manufacturers receive relief from high energy prices.
As quoted in a news report, Phipson said the time for discussion had passed and urged the government to accelerate support through the British Industrial Competitiveness Scheme and extend it across the wider manufacturing sector.
The organisation wants the scheme, currently aimed at around 10,000 energy-intensive businesses, expanded to cover the UK's broader manufacturing base of roughly 130,000 companies and brought forward before its planned 2027 launch.
The financial strain is increasingly affecting business decisions.
According to the survey, 38 per cent of manufacturers have delayed investment plans, while 21 per cent have reduced staffing levels. More than a quarter of firms said they have less than 12 months of cash reserves remaining, and one in 10 warned they are likely to become insolvent within the next year.
Business confidence has fallen to its lowest level in four years, with more than half of manufacturers saying they have yet to see tangible benefits from the government's industrial strategy.
Despite efforts to raise prices, companies continue to face pressure on profit margins. Almost all respondents, 98 per cent, said they expect a significant impact on profitability over the coming months.
Paul Nowak, General Secretary of the Trades Union Congress, reportedly backed calls for expanded support, arguing that rising energy prices linked to geopolitical tensions are placing additional strain on manufacturers. He also called for longer-term measures focused on energy efficiency and decarbonisation to strengthen the sector's resilience.
Holding up for now, but warning lights are flashing
While confidence has weakened, manufacturing activity has not yet collapsed.
Output balances improved to 26 per cent from 21 per cent in the previous quarter, although orders eased slightly from 21 per cent to 18 per cent. Investment intentions, however, fell sharply from 20 per cent to 15 per cent, suggesting businesses are becoming increasingly cautious about future spending.
Reflecting the more challenging outlook, Make UK downgraded its manufacturing growth forecast to 0.4 per cent for 2026, down from an earlier estimate of 0.9 per cent. Growth for 2027 is now expected to be just 0.1 per cent.
Industry leaders argue that without faster intervention on energy costs, more manufacturers could be forced to relocate production, reduce investment or close operations altogether.
For now, factories continue to operate and output remains positive. But the survey suggests many manufacturers believe the pressure is building, and that decisions made over the next year could play a significant role in shaping the future of Britain's industrial sector.
