UK manufacturing sector reports resilient outlook in challenging and uncertain market

Audit, tax, advisory and consulting firm Crowe has provided a snapshot of the UK manufacturing market with the results of its Manufacturing Outlook Report 2025, highlighting caution and resilience in a challenging market.

With UK manufacturing businesses grappling with significant challenges ranging from supply chain disruptions and skills shortages to high operational costs, Crowe’s analysis – conducted in partnership with the Confederation of British Metalforming (CBM) – looks at how businesses are responding to market challenges.

Key findings include:

• 56 per cent of manufacturers are relying on their own cash resources to fund their business (up 4 per cent on 2024)
• 21 per cent of respondents have been discouraged from innovating due to R&D tax credit changes
• 16 per cent expect turnover to reduce in the next 12 months (up 11 per cent from 2024)
• 74 per cent have taken steps to address the rise in National Insurance (NI)
• 66 per cent invested in Net Zero (down 4 per cent from 2024)
• 52 per cent have adopted Artificial Intelligence

Johnathan Dudley (pictured), partner and Head of Manufacturing at Crowe, said: “The UK’s manufacturing sector is facing significant challenges, from supply chain disruption to energy costs and skills shortages, and is now also grappling with uncertainty over global tariffs and yet another raw material supply crisis.

“However, despite all this, the sector continues to demonstrate foresight, innovation and resilience.

“The government appears to be listening to the sector and there is a key drive to reshore, modernise and decarbonise UK manufacturing.

“To enable the sector to play its crucial role in securing a more robust future for the UK, and to address the issues that persist, a dedicated Minister for Manufacturing will be essential.

“Crowe’s “Art of Thrival” process helps businesses to focus on doubling the power of resilience and opportunity, while identifying and limiting the impact of exposures and risks. Businesses will need to focus on what they can influence and change, and remain agile to navigate the uncertain world.”

Crowe’s analysis shows that supply chain disruption impacting the availability and cost of raw materials, a skills shortage stemming from an ageing workforce, and high operational costs including energy, labour and regulatory compliance are placing immense pressure on manufacturing output, profitability and competitiveness.

Geopolitical tensions, the ongoing “trade war”, the commodity and energy crises and automotive transitions are also having an increased impact on the sector.

Nonetheless, the research shows that manufacturers are seeking to address key challenges – from skills shortages to Net Zero – with a resilient and innovative approach, as the UK’s focus turns to reshoring, modernising and decarbonising.

Despite this, the responses indicate that there is continued reluctance for businesses to invest due to the economic challenges, increased costs and geopolitical uncertainty that persists.

For the first time in a generation, there is a clear need for the UK to seek greater protection and bolster national security by relying more on domestic sources and supply chains; whether in relation to military equipment, domestic raw materials, energy, technology, medical or food production. 

Domestic policy changes announced in recent Budgets are also having an effect on growth.

Analysis shows that the April 2025 increase in Employer’s NIC has already led 74 per cent of respondents to make changes.

Of those who took action, just 42 per cent felt that they could plan to increase prices, while 32 per cent are either reducing headcount or looking to cut back on recruitment.

The ongoing manufacturing skills shortage has prompted initiatives by the government, employers and specialist training agencies, including upcoming reforms of the apprenticeship scheme.

The 2025 survey shows a 50/50 split for the very first time, in response to the yes/no question ‘does the apprenticeship scheme work for your business?’

More than half (59 per cent) of respondents identified the cost of energy as affecting the competitiveness of their products and services.

Rising energy costs have been associated with interest in the transition to Net Zero, however this year’s survey suggests Net Zero initiatives may be less of a priority, possibly due to more pressing concerns elsewhere such as spiralling payroll costs.

Read the full report here.