As UK manufacturers enter 2026, the operating environment remains challenging. Costs are rising, skills are scarce and global uncertainty shows no sign of easing. Yet, according to Make UK’s 2026 Executive Survey, something important has shifted: manufacturers are choosing growth over consolidation.
Rather than battening down the hatches, leaders across the sector are doubling down on technology, innovation and customer focus. The message from the shop floor to the boardroom is clear: productivity, resilience and smarter decision-making will define success in the year ahead.
The survey paints a familiar picture of cost pressure. Employment costs remain the single biggest risk facing manufacturers in 2026, with 86% expecting them to rise. Energy, materials, logistics and IT costs are also trending upwards, squeezing margins across the board.
Nearly two-thirds of manufacturers (65%) believe opportunities will outweigh risks in 2026. Instead of relying solely on cost-cutting, many are actively investing in ways to grow revenue, improve efficiency and future-proof their operations.
One of the clearest signals from the report is the relationship between labour costs and technology investment.
As employment costs rise, automation and digital tools are no longer seen as optional. Technology and wider IT costs are increasing faster than almost any other category, not by accident, but by design. Manufacturers are deliberately investing in systems that help them do more with the people and assets they already have.
This includes:
Automation to offset labour shortages
Digital tools to improve productivity and consistency
Better data to support faster, more confident decisions
In short, rising costs are strengthening the business case for smarter operations.
Digital transformation has been talked about for years, but the 2026 outlook suggests it is now firmly in execution mode.
According to the survey:
68% of manufacturers are investing in new product development
60% are increasing investment in digital technologies, AI and automation
55% plan to invest in cybersecurity, up sharply year-on-year
This is no longer about pilots or proofs of concept. Manufacturers are prioritising technologies that deliver measurable impact, improved uptime, higher output, reduced waste and stronger resilience.
Another notable shift in the report is the growing focus on the customer.
More than half of manufacturers are prioritising customer engagement, brand positioning and marketing alongside operational investment, which makes a lot of sense as growth depends on aligning production more closely with real customer demand.
Manufacturers are increasingly using data and AI to:
Forecast demand more accurately
Align production with sales and marketing activity
Launch new products faster
Respond more quickly to changing market conditions
As one manufacturer commented in the report. The old model of “selling what we make” is giving way to “making what customers want”, and that requires visibility, agility and control across production.
To reduce exposure to domestic demand and geopolitical risk, the report highlights that manufacturers are actively diversifying:
55% see expanding product portfolios as a major opportunity
42% are targeting new export markets
37% are entering new sectors
This shift increases operational complexity. More product variants, shorter runs and changing demand patterns all place greater strain on production systems, reinforcing the need for better real-time insight into how factories are actually performing.
With around 48,000 live manufacturing vacancies, skills shortages remain a challenge. While firms are investing in training and upskilling, there is growing recognition that productivity gains must come from augmenting existing teams, not just expanding headcount.
Tools that help teams identify bottlenecks, reduce unplanned downtime and focus effort where it has the biggest impact are becoming essential in a constrained labour market.
As factories become more connected and data-driven, the risk profile changes. Cybersecurity and digital resilience have surged up the priority list, reflecting growing concern about operational disruption, data loss and downtime. This comes as no surprise after the 2025 cyber-attacks on some massive brands, including M&S, The Co-op, and even closer to home, automotive manufacturer, JLR. The latter of which reportedly cost the UK economy £1.9 billion after it shut its production down for weeks, affecting thousands of jobs across the supply chain.
Needless to say, manufacturers are being encouraged to embed resilience into their digital infrastructure from the start, not bolt it on later.
The launch of the UK’s Industrial Strategy has helped lift confidence, with 63% of manufacturers saying it will increase their investment plans. However, optimism remains cautious. Businesses are clear that execution, energy costs and policy certainty will be critical to unlocking growth across UK manufacturing.
What is unmistakable is the direction of travel.
Despite rising costs and uncertainty, UK manufacturers are not standing still. They are investing in technology, rethinking how they use data, and focusing relentlessly on productivity and growth.
2026 is shaping up not as a year of retreat, but as a year focused on growth.