UK Manufacturing Outlook Q2 2025

The latest Make UK Q2 2025 Manufacturing Outlook report paints a mixed picture for the UK manufacturing sector. While output is finally showing signs of recovery, order books remain soft, margins continue to be squeezed, and confidence is buoyed more by future hope than present performance.

In this article, we summarise the key takeaways from the report and share practical ways manufacturers can respond to the challenges posed by macroeconomic headwinds.

Output is Up, But Orders Are Lagging

The report shows that the output balance rose to +9%, a sharp improvement from last quarter’s -1%, showing that production has picked up pace. However, total order books remain negative at -2%, largely driven by weak domestic demand. The weakness in orders is largely due to a sluggish UK market, which reported a balance of -1%. While this is an improvement on Q1, domestic demand has remained consistently weak for nearly two years.

Confidence in the sector remains notably strong, despite recent weakness in orders. Manufacturers expect production to grow over the next three months, with a future output balance of +11%, indicating optimism for continued growth in the coming quarter.

Export Orders Offer Hope Amidst Trade Uncertainty

The total order balance improved to -2%, up from -6% last quarter — a sign of progress, though still in negative territory overall. Much of this improvement is thanks to a rebound in export activity, which helped offset continued weakness in the domestic market.

Concerns around global trade — particularly stemming from US policy — have weighed heavily on manufacturers throughout the first half of the year.

• UK orders rose to -1% from -7%, showing a modest recovery, but still highlighting the domestic market as a persistent constraint on growth.
• Export orders climbed to +7%, up from just +1% in Q1. However, the outlook varies significantly by subsector. Automotive and metals manufacturers are likely to face greater challenges due to US tariffs impacting their supply chains, whereas others may be less exposed to these headwinds.
  
  

Margins Under Pressure, but Investment Remains Muted

Profit margins remain in negative territory for the 14th consecutive quarter, a result of persistent cost pressures and price-sensitive markets. Unfortunately, investment intentions continue to slide.

This quarter’s Manufacturing Outlook reveals a slight improvement in employment prospects, with the balance rising to +1% from -3% last quarter. While this shift into positive territory is encouraging, the change is marginal, indicating employment levels have remained broadly flat overall.

However, the ongoing decline in investment intentions remains a concern for a sector that has historically underinvested compared to its global peers. Despite the headwinds, confidence among manufacturers rose to 7.1, up from 6.8 last quarter. This may reflect hope around future trade deals and stabilising input costs.

FourJaw View:

Even growing sectors face employment challenges. Automation and digital tools will play a key role in doing more with less — not replacing people, but empowering teams with better data and smoother processes. 

UK MANUFACTURING SECTOR PERFORMANCE & FORECASTING

• Food & Drink

  • The UK’s largest manufacturing subsector, now accounting for 18.7% of GVA.

  • Forecast output growth: +1.6% in 2025.

  • Employment: -2.8% in 2025, -1.8% in 2026.

  • The sector is growing, but automation and efficiency will be key as headcounts decline.

• Non-Metallic Minerals (e.g., bricks, glass, cement)

  • Output: +3.4% (2025), +2.2% (2026).

  • Employment: +1.3% (2025), +1.2% (2026).

  • Linked closely to construction sector activity.

• Rubber & Plastics

  • Recovering after a steep contraction in 2024.

  • Output: +2.2% (2025), flat in 2026.

  • Employment: -5.5% (2025), +0.1% (2026).

  • Output may rebound, but labour cuts signal a need for productivity gains.

• Other Transport (Aerospace, Defence, Rail, Maritime)

  • Output: -0.2% (2025), +0.7% (2026).

  • Employment: +4.4% (2025), -1.4% (2026).

  • Workforce growth highlights skills demand, even as output plateaus.

• Electronics

  • Output: -0.5% (2025), -0.4% (2026).

  • Employment: -6.6% (2025), -0.8% (2026).

  • Most significant employment contraction across all subsectors.

• Basic Metals

  • Output: -9.5% (2025), -11.3% (2026) — the sharpest contraction forecasted.

  • Employment: -5.5% (2025), -3.4% (2026).

  • Continues to struggle under global cost and trade pressures.

• Motor Vehicles (Automotive)

  • Output: -7.1% (2025), -1.1% (2026).

  • Employment: Relatively stable at -1.4% (2025), +0.4% (2026).

  • Weakened by tariffs and suppressed global demand.

• Mechanical Equipment

  • Output: -0.5% (2025), +0.2% (2026).

  • Employment: -5.0% (2025), -2.7% (2026).

  • Often viewed as a bellwether for domestic investment trends.

• Electrical Equipment

  • Output: -1.9% (2025), +1.6% (2026).

  • Employment: -6.3% (2025), +3.8% (2026).

  • Volatility in output and headcount continues.

• Paper & Printing

  • Output: -3.4% (2025), -1.7% (2026).

  • Employment: -4.2% (2025), -4.1% (2026).

  • The sector remains uncertain with downward revisions in forecasts.

• Pharmaceuticals

  • Output: -1.6% (2025), -0.6% (2026).

  • Employment: -2.0% (2025), +0.8% (2026).

  • Returning to normalcy after the post-pandemic boom.

• Chemicals

  • Output: -0.1% in both 2025 and 2026.

  • Employment: -4.8% (2025), -0.6% (2026).

  • Sector stability masks underlying workforce reduction.

Source: Data from Make UK Q2 2025 Manufacturing Outlook Report

Final Thoughts

The Q2 2025 Manufacturing Outlook shows a sector facing stiff challenges — but also one that's adapting. The key to turning modest recovery into sustainable growth lies in efficiency, agility, and visibility.

At FourJaw, we believe digital tools like ours are no longer ‘nice to have’ — they’re essential. By shining a light on production performance, we help manufacturers unlock hidden capacity, boost margins, and stay competitive in an uncertain world.