UK manufacturing shows further signs of recovery in December

2nd Jan 2026 11:48

(Sharecast News) - UK manufacturing showed further signs of recovery at the end of 2025, with output and new orders edging higher and overall activity expanding for a second consecutive month, according to S&P.

The S&P Global UK manufacturing purchasing managers' index (PMI) rose to 50.6 in December from 50.2 in November, marking a 15-month high and remaining above the 50.0 threshold that separates growth from contraction, although it fell short of the earlier flash estimate of 51.2.

Output increased for a third straight month, while new orders rose for the first time since September 2024, signalling a tentative improvement in underlying demand.

Production growth was supported largely by stock building and efforts to clear backlogs of work, alongside a modest uplift in new business.

S&P Global said manufacturers also faced fewer headwinds late in the year as the impact of uncertainty linked to the Autumn Budget, tariffs and the JLR cyber-attack began to ease.

Output rose across consumer, intermediate and investment goods for the first time since August 2024, though the expansion was concentrated among large manufacturers, with small and medium-sized firms still reporting declines.

New orders improved slightly overall, driven by domestic demand, while export orders fell for a forty-seventh consecutive month.

However, the decline in overseas business was mild and among the weakest in that sequence, with manufacturers reporting signs of recovering demand from the US, Asia-Pacific and the Middle East.

Employment continued to fall, extending a run of job losses to fourteen months, but the pace of decline was the slowest over that period.

Firms cited redundancies, hiring freezes and cost-control measures, while backlogs of work contracted for a forty-fourth month, albeit at a much slower rate, indicating some easing of excess capacity.

Price pressures picked up in December as input cost inflation accelerated and factory gate prices rose after falling in November.

Manufacturers reported higher prices across a broad range of inputs, including electronics, energy, metals and packaging, with some suppliers passing on increased payroll tax costs.

Small and medium-sized firms were more affected by rising costs than larger producers, which saw the weakest increase in purchasing prices.

Rob Dobson, director at S&P Global Market Intelligence, said the data pointed to "further signs of growth" ahead of the turn of the year, with output rising for a third month and new orders improving "albeit slightly".

He noted that domestic demand remained supportive, while export business had taken "a sizable stride towards stabilising" despite nearly four years of decline.

However, Dobson cautioned that the sustainability of the recovery remained uncertain, adding that growth needed to shift away from inventory building towards stronger demand.

He said December's interest rate cut could help encourage spending and investment, but warned that business optimism slipped for the first time in three months.

Reporting by Josh White for Sharecast.com.