The UK manufacturing output fell by 1.1% in January 2025, following a modest increase of 0.6% in December 2024, according to the latest economic indicators. The sector, which plays a crucial role in the UK’s production industries, continues to face challenges, including declining new orders, weaker client confidence, and rising inflation.
Manufacturing’s Role in the UK Economy
Manufacturing is a vital part of the UK’s production sector, alongside mining, electricity, water & waste management, and oil & gas extraction. In the final quarter of 2024, manufacturing contributed 8.6% to the UK’s total economic output (gross value added) and 8.0% to employment.
Despite its significance, the sector is experiencing a slowdown, with output falling by 0.9% over the three months to January 2025 compared to the previous quarter. On an annual basis, manufacturing output was 1.3% lower than in the same period in 2024, indicating ongoing struggles for the industry.
Key Trends in UK Manufacturing Output
- January 2025: Output declined 1.1%, reversing December’s 0.6% growth.
- Three months to January 2025: A 0.9% contraction compared to the three months leading to October 2024.
- Annual comparison: Output fell 1.3% year-on-year, reflecting persistent industry challenges.
- Sector-wide decline: Nine of the 13 manufacturing subsectors reported decreased activity in January 2025.
UK Manufacturing PMI Signals Continued Contraction
The Purchasing Managers’ Index (PMI) is a key indicator of manufacturing health. A PMI value of 50 indicates no change, while values above 50 suggest expansion and those below 50 signal contraction.
In February 2025, the UK manufacturing PMI dropped to 46.9, down from 48.3 in January, marking the fourth consecutive month of decline. This indicates a contraction in manufacturing activity, driven by:
- Falling new orders and weaker client confidence
- Declining domestic and export activity
- Rising inflation and supply chain disruptions
- Reduced employment across the sector
Despite these challenges, business optimism is improving, suggesting that industry leaders remain hopeful about future recovery.
Challenges Facing the UK Manufacturing Sector
The UK’s manufacturing sector is dealing with several economic pressures:
- Declining Demand – Lower domestic and international orders are reducing output.
- Rising Inflation – Increased costs for materials, wages, and energy are squeezing profit margins.
- Supply Chain Issues – Disruptions continue to impact production efficiency and delivery timelines.
- Weak Business Confidence – Investors and clients are cautious, leading to slower growth.
- Employment Decline – Job losses in manufacturing highlight the sector’s struggles.
Outlook for UK Manufacturing in 2025
While the UK manufacturing output is currently declining, there are signs of potential recovery. The government and industry leaders are closely monitoring key indicators, including GDP growth, inflation trends, and global trade conditions.
The coming months will be crucial in determining whether the sector can stabilise and return to growth, or if further economic headwinds will lead to a prolonged downturn.
