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UK manufacturing rebounds in Q3, growth outlook stays weak: BDO

23 Sep '25
3 min read
 UK manufacturing rebounds in Q3, growth outlook stays weak: BDO
Pic: Dong Nhat Huy / Shutterstock.com

Insights

  • Britain's manufacturing rebounded in Q3, led by export growth and pent-up investment demand.
  • Output rose to +25 per cent, orders to +16 per cent, and investment intentions to +25 per cent.
  • Vacancies cost ~$5.4 billion yearly.
  • Costs remain a worry, with over half of firms raising prices.
  • Output is still forecast to fall in 2025 and 2026.

Britain’s manufacturing sector recorded a sharp rebound in the third quarter (Q3) of 2025, driven by stronger exports and pent-up investment demand, according to Make UK/BDO’s Q3 Manufacturing Outlook survey.

Recruitment intentions have risen, but the sector’s 46,000 unfilled vacancies are costing £4 billion (~$5.4 billion) in lost output annually.

The survey showed all indicators improved after a string of weak quarters, with export growth particularly robust. The US regained its position as the second most favoured market for growth, after dropping out of the top three in Q2 due to tariff uncertainty.

The balance on output rose to +25 per cent from +9 per cent in the last quarter, with total orders climbing to +16 per cent from -2 per cent in Q2. Export orders again drove growth, increasing to +23 per cent from +7 per cent, while UK orders rebounded to +12 per cent from -1 per cent last quarter, according to the survey.

Recruitment intentions improved sharply to +15 per cent from +1 per cent (-3 per cent in Q1), and investment intentions jumped to +25 per cent from +2 per cent, indicating a release of pent-up investment demand. The Q1 balance was similarly weak at just +5 per cent. Nearly 70 per cent of companies said they plan to invest in technology and automation, signalling a focus on long-term productivity gains.

“After a period of considerable uncertainty in global markets, these figures are an encouraging sign that manufacturers’ confidence is improving and, more importantly, being translated into growth and investment. However, one swallow doesn’t make a summer, and with UK and European markets in particular remaining anaemic it wouldn’t take much to knock prospects for further growth,” Stephen Phipson, chief executive at Make UK, said.

“These latest findings offer a glimmer of hope for the manufacturing sector. Despite what has been a relentless year by all accounts, manufacturers have somehow boosted their output and doubled down on their investments to match,” said Richard Austin, head of Manufacturing at BDO.

However, rising costs remain a concern. Nearly 70 per cent of firms expect cost increases in the upcoming Budget, while 68 per cent report costs have already exceeded expectations in the last six months. Over half of manufacturers have already raised prices this year, with a further 53 per cent planning to do so in the next six months, keeping inflationary pressures alive.

Despite the positive momentum, Make UK cautioned against assuming a sustained recovery, forecasting sector output to contract by 0.1 per cent in 2025 and 0.6 per cent in 2026.

“Government has made great strides in backing manufacturing with its industrial strategy and it must avoid imposing any further cost burdens which will hamper its number one mission of boosting economic growth,” Phipson cautioned.

“The spectre of the upcoming Budget looms and the sector will need robust signalling from the government that their investments are worth the risk. All eyes will be on the Autumn Budget and it’s vital that the government seizes this opportunity to prove their commitment to the sector and to the promises made in the Industrial Strategy,” Austin stressed.

ALCHEMPro News Desk (HU)

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