UK Manufacturing Shows Tentative Growth as PMI Hits 15-Month High
December brought further evidence of stabilisation and modest growth across the UK manufacturing sector, with output rising for the third consecutive month and new orders increasing for the first time since September 2024. According to the seasonally adjusted S&P Global UK Manufacturing Purchasing Managers’ Index (PMI), activity edged up to 50.6 in December from 50.2 in November, marking its highest level in 15 months. Although below the earlier flash estimate of 51.2, the reading remained above the neutral 50.0 threshold for a second successive month, signalling expansion rather than contraction.
Three key PMI sub-components pointed to improving operating conditions. Output and new orders both increased, while suppliers’ delivery times lengthened, often associated with rising demand. Although employment levels and stocks of purchases continued to fall, the pace of decline eased compared with November. The latest growth in production was driven largely by inventory building and efforts to clear backlogs, rather than a strong surge in underlying demand. Manufacturers also benefitted from easing headwinds late in the year, as uncertainty linked to the Autumn Budget, tariff concerns and the impact of the JLR cyber-attack diminished.
Encouragingly, output expanded across the consumer, intermediate and investment goods sectors for the first time since August 2024. However, growth was uneven by company size. Large manufacturers drove most of the expansion, while small and medium-sized enterprises continued to report declines in both output and new orders. Overall new business volumes rose slightly, ending a 15-month downturn. Consumer goods producers saw the strongest improvement, intermediate goods stabilised, while investment goods orders continued to fall.
The domestic market remained the primary driver of demand. New export orders declined for the 47th consecutive month, though the rate of contraction was mild and among the weakest recorded in this period. Some manufacturers reported early signs of recovering demand from the United States, Asia-Pacific and the Middle East.
Employment fell for a 14th straight month, but the rate of job losses slowed to its weakest level in this sequence. Redundancies, hiring freezes and cost-control measures remained common, while excess capacity persisted as backlogs of work continued to decline, albeit at a slower pace.
Cost pressures picked up modestly in December. Input prices rose more quickly, driven by higher costs for energy, electronics, metals and packaging, alongside suppliers passing on payroll-related expenses. Factory gate prices also returned to growth after a brief dip in November. Despite the improved activity, business confidence softened from a nine-month high, reflecting ongoing concerns over costs, taxation, global trade uncertainty and government policy.
Overall, December’s data point to cautious optimism, with growth emerging but still fragile and uneven as manufacturers look ahead to 2026.
