A closely watched survey indicates that the UK manufacturing sector is experiencing one of its best months since the Labour Party took office, as the industry gradually recovers from the impacts of tax hikes and geopolitical turbulence. The S&P Global UK Manufacturing PMI rose to 51.8 in January, up from 50.6 in the previous month and slightly above the preliminary estimate. This marks the third consecutive month the index has remained above the critical 50-point threshold, signaling expansion within the sector. Current manufacturing activity levels have rebounded close to the post-election peak seen in August 2024, following Labour’s general election victory.
The report highlights that despite Chancellor Rachel Reeves’ increase in domestic labor costs and the dampening effect of former US President Trump’s tariff policies on global demand, the UK manufacturing sector is showing signs of stabilization and improvement. Rob Dobson, Director at S&P Global Market Intelligence, noted, “The UK manufacturing sector has made a solid start to 2026, demonstrating encouraging resilience against a backdrop of escalating geopolitical tensions.”
Boosted by rising export sales to Europe, the United States, and China, new export orders for UK manufacturers improved for the first time in four years, driving the fastest output growth since last October. Companies across all manufacturing categories reported increases in new order volumes. The job market also displayed signs of stabilizing: although S&P data shows that manufacturing employment has declined for 15 consecutive months, the rate of job cuts in January was the slowest recorded during this downturn.
Within the sector, employment increased at investment goods producers, while intermediate and consumer goods manufacturers continued to reduce their workforce sizes. The UK manufacturing industry still faces multiple challenges, including persistently rising labor and raw material costs, as well as supply chain pressures caused by adverse weather conditions and product shortages leading to delivery delays.
Nevertheless, business optimism for the year ahead has strengthened. Encouraged by expectations of a easing in global headwinds, improved export demand, and the implementation of corporate investment plans, the manufacturing business confidence index climbed to its highest level in 17 months. Dobson added, “Although concerns about the geopolitical landscape, government policies, and tariff disputes persist, UK manufacturers are increasingly focusing on future growth opportunities.”