The UK manufacturing sector is returning to peak levels since August 2024

Economic indicators in the UK point to a recovery in manufacturing activity at the beginning of 2026. The Manufacturing Purchasing Managers’ Index (PMI) jumped to 51.8 in January, reaching its highest level since August 2024. This upward movement from December’s 50.6 indicates a gaining momentum in sector recovery, after months of stagnation.

Export Orders as the Main Growth Driver

The primary catalyst for improvement was a remarkable increase in new orders, especially from abroad. The new orders sub-index rose from 50.2 to 53.2 — the highest since February 2022. Notably, export orders, for the first time in four years, showed positive growth, signaling an improvement in the competitiveness of British products on international markets. This surge reflects a long-awaited recovery in external demand, which had been under pressure in previous years.

Business Confidence and Labor Market Changes

According to analysts at S&P Global Market Intelligence, the manufacturing sector has entered a new phase of development. Business confidence reached its highest level since the Autumn Budget 2024, indicating growing optimism among management about future prospects. This renewed trust is a critical factor in sustaining the growth momentum.

Positive changes also occurred in the labor market: although manufacturing employment continued to decline, the rate of decrease was the slowest since the October 2024 employment tax increase. This suggests that companies have stabilized staffing levels and are willing to consider new hires as demand grows.

Investment Activity as a Long-Term Indicator

Another significant indicator is the rise in business investment costs, reaching their highest level since August 2024. This suggests that manufacturers are willing to invest in expanding production capacity and upgrading equipment, which is a positive signal for the future. Investment activity traditionally precedes production expansion, so its growth indicates a potential strengthening of the trend.

The combination of these factors — recovering export orders, rising business confidence, and increased investment activity — lays the foundation for a sustainable recovery of the UK manufacturing sector after a period of uncertainty.