UK industries start 2026 on a strong note as optimism and exports rise

Manufacturing output increased for the fourth straight month, matching the joint-fastest pace since September 2024. Growth was supported by improved export sales, a stable domestic market and customer restocking. Production expanded in consumer and investment goods, though intermediate goods output declined. Large manufacturers drove the expansion, while SMEs recorded a third successive monthly fall in production, S&P said in a press release.

New order growth accelerated to its fastest pace in almost four years, with demand rising across all major goods categories. Notably, new export orders increased for the first time in four years, reflecting stronger sales to Europe, the US, China and several emerging markets.

Improving activity lifted sentiment, with business optimism reaching its highest level since before the 2024 Autumn Budget. Around 58 per cent of manufacturers expect output to rise over the next 12 months, citing hopes of improved market confidence, new product launches, planned investments and stronger export demand. However, concerns remain around geopolitics, government policy and tariff uncertainty.

Labour market conditions showed tentative signs of stabilisation. Although employment fell for a fifteenth consecutive month, the pace of job losses was the weakest in that period. Staffing levels rose among investment goods producers and large manufacturers but continued to decline at SMEs.

Supply chains remained under pressure, with backlogs of work falling for the forty-fifth month running and supplier delivery times lengthening further. Purchasing activity increased at the fastest rate in more than three-and-a-half years as firms stepped up input buying.

Cost pressures edged higher in January, driven by increased prices for raw materials, energy, freight, metals, packaging and plastics. Output prices also rose for a second consecutive month and at a faster pace than in December, as manufacturers passed on higher costs.

“UK manufacturing made a solid start to 2026, showing encouraging resilience in the face of rising geopolitical tensions. Rates of output and order book growth accelerated, while new export business rose for the first time in four years, with Europe, China and the US the main recipients,” said Rob Dobson, director at S&P Global Market Intelligence. “There was also a positive bounceback in business confidence, which rose to its highest level since before the 2024 Autumn budget, as manufacturers focussed on opportunities lying ahead despite persistent concerns about the geopolitical environment, Government policy and tariff tensions.”

“There was also encouraging news on the jobs front. Although the strongest rise in new business for almost four years was insufficient to fully quell reductions to staff headcounts, the rate of cutting slowed to its weakest since job losses started 15 months ago. Cost pressures are creeping higher though, as the pass through of the increased Minimum Wage and employer National Insurance (NI) contributions continue to work through the supply chain alongside the rising costs for commodities such as metals,” added Dobson.

Fibre2Fashion News Desk (SG)