Nearly two-thirds of manufacturers believe opportunities to succeed in 2026 outweigh the risks, with the UK's new industrial strategy playing a role in "tipping the balance in favour of confidence," according to a new report.
Employment costs are considered to be the biggest risks to the sector, followed by general economic uncertainty and political and geopolitical uncertainty, according to the MakeUK and PwC Executive Survey 2026: Time for Mission Growth. Other cost pressures for the year include the price of energy and inputs. The report said that although wholesale energy prices have fallen significantly since their 2023 peak, this is not being passed on to industry. "Poorly timed contract renewals, energy suppliers holding onto margins and costly UK industrial energy policies have created a triple squeeze" the report warned.
On a more positive note, the survey says that 63% of businesses agree that introducing a long-term Industrial Strategy for the UK will increase their investment plans "no doubt even more so for those within the now defined ‘Advanced Manufacturing’ and ‘Frontier’ sectors such as batteries and agri-tech.”
Building on the results of last year's survey MakeUK and PwC say that manufacturers are investing in digital transformation, with an increased focus on new product development and digital technologies, AI and automation. “The presence of an Industrial Strategy has tipped the balance with more companies agreeing that the UK will remain a competitive location for manufacturing in 2026,” the survey says.
Implementation of the strategy will be a key driver for investing in the UK, the report says. “Effective and timely implementation will be essential to make the UK more attractive. Currently just 41% of UK manufacturers agree that the UK will be an attractive place for them to invest, with almost the same number of the opposite view.”
In addition, there is a perception that the detail required to support business investment plans is still missing, with the survey asserting: “In 2026 the Government will need to push ahead with both the detail of the Industrial Strategy and also its implementation,” the survey adds.
The survey also indicates that the Industrial Strategy is supporting sustainability with manufacturers investing in energy efficiency, circularity and renewable energy sources, which help to reduce waste and drive down costs. “The Government has provided the sector with a unifying approach that highlights their commitment to meet net-zero targets and establishes a springboard to opportunities,” the survey says.
“As had been hoped, the publication of the Industrial Strategy has increased positivity about the future, but optimism is cautious,” the survey says. One respondent said: “Without an industrial strategy to encourage growth within the automotive sector, there will be no automotive manufacturing in the UK,”
While there are numerous macro, financial and geopolitical risks to be contended with, the survey says that manufacturers are doubling down on innovation and digital transformation to drive growth and resilience. “Expansion, diversification and investment in technology offer key opportunities to offset risks. Our data on investment priorities highlights how manufacturers are responding to rising costs and economic uncertainty by focusing on growth and resilience.”
Further reading:
- New Industrial Strategy will boost investment say business leaders
- Modern Industrial Strategy promises lower energy costs
- Societies issue joint call in response to government industrial strategy
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