The UK manufacturing sector recorded renewed expansion in December 2025, with the S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) increasing to 50.6. This marks the highest reading in 15 months and the second consecutive month above the neutral 50.0 level, highlighting ongoing growth driven mainly by domestic demand and production increases. However, export orders continued to fall, reflecting persistent challenges overseas.

UK Manufacturing PMI Signals Expansion Amid Mixed Performance

The December UK manufacturing PMI edged up from 50.2 in November to 50.6, although it came below the earlier flash estimate of 51.2. Output expanded for the third straight month, while new orders rose for the first time since September 2024. This growth was largely due to stockpiling of finished goods and efforts to reduce work backlogs. Easing of prior headwinds—including uncertainty around the Autumn Budget, tariffs, and the Jaguar Land Rover cyber-attack—also supported higher production.

Production increased across consumer, intermediate, and investment goods sectors, marking the first simultaneous expansion of all three since August 2024. Despite this, growth was concentrated mainly among large manufacturers, with small and medium enterprises (SMEs) continuing to face contraction. Domestic markets remained the key growth driver, while export orders declined for a 47th straight month. Although export demand is still contracting, decreased severity and tentative improvements were noted in the US, Asia-Pacific, and Middle East regions.

Employment, Costs, and Confidence Trends

Manufacturing employment fell for a 14th consecutive month in December, but the rate of job losses slowed compared to previous months. Firms attributed reductions to redundancies, hiring freezes, non-replacement of leavers, and ongoing cost-containment measures. Meanwhile, input cost inflation accelerated, with price rises reported for electronics, energy, metals, and packaging materials. Factory gate prices reversed November’s decline and resumed an upward trajectory.

Despite the PMI expansion, business confidence regarding the year ahead declined from November’s nine-month high. Manufacturers expressed concerns about persistent input costs, rising taxation, reduced international competitiveness, geopolitical uncertainty, and possible impacts from future government policies.

Analyst Insight and Market Outlook on Expansion

Rob Dobson, Director at S&P Global Market Intelligence, noted that sustaining this expansion will depend on demand strengthening beyond the temporary improvements from inventory rebuilding and backlog clearance. He stated, “The start of 2026 will show if growth can be sustained after these temporary boosts subside. The base of the expansion needs to shift more towards rising demand and away from inventory building and backlog clearance.” Mr. Dobson also expressed optimism that the interest rate cut in December may aid this transition.

With the PMI at 50.6, the UK manufacturing sector is entering a phase of expansion as 2026 begins. However, the ongoing export order contraction and prolonged employment declines remain key challenges for investors and market watchers. The ability of domestic demand to maintain momentum will determine if this expansion broadens further in the coming months.