Britain’s manufacturing sector returned to growth for the first time in more than a year in November, signalling a tentative improvement in industrial conditions after a prolonged period of contraction.
The S&P Global Purchasing Managers’ Index (PMI) rose to 50.2 last month from 49.7 in October, marking the first expansion since September 2024 and matching earlier flash estimates.
The upturn was driven by firmer domestic demand and a slower fall in export orders, S&P Global said on Monday.
Survey respondents reported stabilising sales after 13 months of decline, aided by improved activity in the UK market.
Export demand continued to fall, but at its slowest pace in a year.
Growth led by investment goods
Underlying sector performance remained fragile. Investment goods manufacturers were the only category to report rising output, while consumer and intermediate goods producers saw further declines.
Larger firms were also more likely to expand than small and medium-sized businesses.
Employment in the sector continued to fall, though job losses were recorded at one of the slowest rates in a year.
Selling prices slipped for the first time since October 2023, reflecting easing cost pressures and growing price competition.
Manufacturers cited higher wage bills and increased national insurance contributions as factors behind reduced staffing and subdued hiring.
Despite the modest improvement, third-quarter official data shows manufacturing output remains 1% lower than a year ago, a downturn worsened earlier in 2024 by a cyberattack that forced Jaguar Land Rover to pause production temporarily.
Manufacturers cautiously optimistic
Business sentiment strengthened to a nine-month high, with firms hopeful that advances in artificial intelligence, expanded data centre activity and future investment could lift productivity and demand.
Some respondents expect technology adoption to support efficiency gains or spur downstream orders over the coming year.
Rob Dobson, director at S&P Global Market Intelligence, noted that the uptick was notable given the persistent uncertainty ahead of the Autumn Budget.
He suggested that reduced policy anxiety could bolster confidence further, though he cautioned that headline growth remained weak.
Rising competitive pressures and slowing inflation, he added, had pushed factory gate prices lower for the first time in more than two years.
This shift, alongside a mild rebound in output, may steer policymakers toward growth support rather than inflation containment.
Broader economic forecasts soften
The survey predates Chancellor Rachel Reeves’ November budget, which raised taxes by £26bn while avoiding steep new burdens on business.
Analysts will be watching how the industry responds to the absence of explicit growth-focused incentives.
Meanwhile, KPMG predicts the UK economy will slow in 2026 as soft consumer confidence and a cooling labour market weigh on activity.
The firm expects GDP to rise 1.0% that year, down from 1.4% in 2025, and forecasts unemployment to reach 5.2% as companies curb hiring and automate more roles.
Wage growth is expected to ease toward 3% by mid-2026, potentially opening the door for interest rate cuts.
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