UK manufacturers have experienced their fastest growth in nearly two years under the leadership of UK Prime Minister Andy Burnham, with factory output rising for four consecutive months. The latest data from the S&P Global purchasing managers’ index (PMI) shows the July growth was the fastest seen in nearly two years, offering a positive outlook for the industry. However, Burnham has not yet resolved the long-term concerns that continue to plague the sector, particularly regarding energy security and global economic stability.
Middle East tensions weigh on outlook
The PMI for July came in at 51.9, down slightly from 52.5 in June, but still within the range indicating expansion, which is anything above 50. The ongoing war in the Middle East is creating growing unease among manufacturers, who fear the conflict may disrupt supplies of oil and gas and drive up production costs. This uncertainty has pushed the index lower and raised questions about the sustainability of the current growth pattern.
Despite these challenges, the manufacturing sector remains broadly optimistic about new business. A nine-month consecutive expansion has been sustained, fueled by increasing demand. Still, companies are cautious, balancing their hopes with concerns over whether the current pace can continue without further shocks to energy markets or supply chains.
New orders and employment show mixed signals
New business, both domestic and international, has seen a steady rise for eight consecutive months. The stabilization of global supply chains, which had previously been disrupted by U.S. tariffs in 2025, is contributing to the uptick in international demand.
However, the boost in business has not translated into a significant increase in hiring. While staffing levels have improved for four months straight, the growth has been sluggish, described as the weakest in the current expansion phase. Companies are cautious about hiring more workers, reflecting the broader uncertainty gripping the sector.
Industry voices caution and hope
Rob Dobson, director of S&P Global Market Intelligence, highlighted the encouraging developments in July, with output, new orders, and export activity all showing improvement. He noted that businesses currently remain cautious, which could slow hiring and expansion efforts. But he also pointed out that the rising volume of work is likely to lead to increased hiring in the near future.
Dobson suggested that resolving global trade tensions and implementing favorable UK policy changes could provide a strong boost to the industry. A more confident business environment would help manufacturers scale up operations and manage the growing workloads effectively.
Ginni Cooper, a manufacturing partner at accounting firm MHA, emphasized the resilience of the industry in the face of fluctuating commodity prices. She praised recent initiatives by the new government, including the introduction of vocational training in schools, as a step toward strengthening the long-term capabilities of the manufacturing sector.
In contrast, Matt Swannell of the Item Club expressed a more pessimistic view of the remainder of the year. He warned that the conflict in the Middle East remains the biggest unknown, with the collapse of the ceasefire already contributing to a rise in energy prices. These higher costs, combined with inflation-driven reductions in consumer spending and stagnant wage growth, could pose serious challenges to the industry’s continued recovery.
Swannell’s concerns highlight the fragile balance the manufacturing sector is trying to maintain. Energy prices are expected to continue rising, putting more pressure on business costs and further squeezing consumer demand. As the UK government moves forward, it will need to address both the domestic and global factors affecting the industry to ensure its long-term stability and success.