Manufacturing activity hits 16-month high
Commenting on the latest CIPS UK Manufacturing Purchasing Managers’ Index, which has increased to 51.8 in January, up from 50.6 in December, Mike Thornton, Head of Industrials at RSM UK, said:
“This is a strong start to 2026 for the UK manufacturing sector. With the Autumn Budget behind us, and JLR turbulence in the rear view mirror, resilient UK manufacturers are increasing production. Order books are filling up as the backlog of work improved, new orders increased to 53.2 and new export orders jumped to a four-year high at 51.9 demonstrating a strengthening pipeline at the start of 2026.
“2025 saw trade uncertainty, but despite tariff and geopolitical risks, UK manufacturers are maximising new trade opportunities. If export demand continues, if we see no more tariff changes and if Industrial Strategy clarity boosts investment, then 2026 could unlock real growth for UK manufacturing.
“Leveraging the production strength we hold in the UK to maximise commercial opportunities will be key. The potential deal between JLR and Chery to produce Jaecoo vehicles in existing UK facilities– would not only deliver for JLR, but bring skilled jobs and a wider economic boost.
He added: “Despite a positive start, crippling energy cost will persist in 2026, and UK manufacturers are bracing for the introduction of a new carbon border tax in 2027. In addition, any retaliatory tariff action from the EU could present a real risk to UK manufacturing and derail future growth.”
Thomas Pugh, chief economist at RSM UK, said: “The fourth consecutive rise in the manufacturing PMI is a good sign that business confidence is rising again as the uncertainty around the budget recedes. What’s more, the increase in the new orders index suggests that, despite all the geopolitical risks, underlying global demand is returning.
“However, despite the recovery in output, employment prospects remain depressed with the employment balance only ticking up to 48.5. Anecdotally, the high cost of labour is holding back employment. That is probably one reason why the input prices index rose a little. One other aspect supporting input prices inflation will be soaring commodity prices, although some of that has unwound in the last few days, particularly as metal prices remain elevated.”
“Signs of a recovery in demand and continuing cost pressures is another reason for the MPC to proceed cautiously with interest rate cuts this year, despite the weak employment outlook.”