UK manufacturers saw production rise for the first time in a year — but here’s the catch: they’re still contracting, and they’re terrified the Autumn Budget might kill any momentum before it even starts.
October’s manufacturing PMI hit 49.7, the highest we’ve seen in a year. Sounds great, right? Not quite. It’s still below 50, which means the sector’s technically still shrinking. And with Chancellor Rachel Reeves preparing to plug a £30bn fiscal black hole on 26 November, manufacturers are bracing for impact.
Let’s break down why this “recovery” might be the shortest comeback tour in economic history.
Why UK Manufacturing’s Recovery Feels Fragile
The October bump came largely from intermediate goods producers getting back on track — mostly thanks to Jaguar Land Rover bouncing back from a cyberattack. So yeah, we’re celebrating a return to normal, not actual growth.
Rob Dobson from S&P Global Market Intelligence put it bluntly: “The bounce could prove short-lived.” Translation? Don’t pop the champagne yet.
Here’s what’s weighing on manufacturers:
- Labour costs are crushing hiring: Employment dropped for the 12th straight month
- Minimum wage hikes: Already squeezing margins
- NIC increases: Employers’ national insurance contributions keep climbing
- Budget uncertainty: Firms are in “holding pattern” mode until policy clears up
Autumn Budget 2025: What Manufacturers Fear Most
Rachel Reeves isn’t exactly hiding the fact that tax hikes are coming. With a £30bn gap to fill, businesses aren’t optimistic.
Over half of UK businesses told the Institute of Chartered Accountants (ICAEW) they’d cut staff or freeze hiring if the Autumn Budget brings more tax pain. That’s not a threat — it’s a forecast.
Manufacturers are stuck waiting for two things: domestic policy clarity and some stability on the geopolitical front. Until then, investment and expansion plans are on ice.
Is There Any Good News?
Sort of. Business optimism scraped an eight-month high in October, though it’s still below the long-term average. More than half of survey respondents think output will improve over the next year.
And earlier S&P data showed the broader UK economy hit 51.1 in October — a two-month high and above the growth threshold. So there’s some life in the system.
But for manufacturing specifically? The recovery’s real, just extremely fragile.
What Happens Next
If the Autumn Budget piles on more employer costs — especially around wages and NICs — we could see manufacturers pull back fast. Job cuts, delayed investment, and stalled production aren’t hypotheticals; they’re already happening.
The question isn’t whether UK manufacturing can recover. It’s whether the government will let it.
Want to stay ahead of UK economic shifts? Keep an eye on upcoming policy announcements and manufacturing data — they’ll tell you where the economy’s actually heading, not just where we hope it’s going.
FAQ
Q1: What is the UK manufacturing PMI and why does it matter?
A: The Purchasing Managers’ Index (PMI) measures manufacturing sector health. Above 50 means growth; below 50 means contraction. October hit 49.7 — better than recent months but still technically shrinking.
Q2: Why are manufacturers worried about the Autumn Budget?
A: Chancellor Rachel Reeves faces a £30bn fiscal shortfall and is expected to raise taxes. Manufacturers fear higher employer costs (wages, NICs) will force them to cut jobs and halt expansion plans.
Q3: What’s causing job losses in UK manufacturing?
A: Rising labour costs are the main culprit. Minimum wage increases and higher employers’ national insurance contributions are squeezing margins, leading firms to shed staff for 12 consecutive months.
Q4: Is the UK economy growing overall?
A: Sort of. Overall business activity hit 51.1 in October, crossing the growth threshold. But manufacturing remains stuck below 50, signalling ongoing challenges in that specific sector.
Q5: Will UK manufacturing recover in 2025?
A: It depends on government policy and global stability. Over half of manufacturers expect output to improve over the next year, but budget decisions and geopolitical clarity will determine whether optimism translates to reality.
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Effective Date: 15th July 2025
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