UK industrial activity stabilises further in Dec; PMI rises to 50.6

Three key PMI sub-components signalled improving operating conditions, as output and new orders increased and suppliers’ delivery times lengthened. Although stocks of purchases and employment continued to decline, the pace of contraction eased compared with November, S&P Global said in a press release.

Production growth was largely driven by stock building and efforts to clear backlogs of work, alongside a modest improvement in demand. Manufacturers also benefited from easing headwinds towards the end of the year, as the negative impacts of uncertainty linked to the Autumn Budget, tariffs and the JLR cyber-attack moderated.

Output expanded across the consumer, intermediate and investment goods sectors, marking the first instance of simultaneous growth since August 2024. However, expansion remained uneven, with growth concentrated among large manufacturers, while small and medium-sized firms continued to record downturns in both output and new orders.

New business inflows increased slightly, supported mainly by domestic demand. New export orders contracted for the forty-seventh consecutive month, although the pace of decline was mild and among the weakest recorded during this prolonged downturn. Survey respondents reported early signs of recovering demand from the US, Asia Pacific (APAC) and Middle East markets.

Employment fell for a fourteenth successive month, but job losses eased to their weakest rate over this period. Workforce reductions were attributed to redundancies, hiring freezes, non-replacement of leavers and cost-control measures. Despite this, spare capacity persisted, with backlogs of work declining for the forty-fourth month running, albeit at a much slower pace.

Some firms also reported suppliers passing on higher payroll-related costs. Small and medium-sized manufacturers faced sharper cost increases than larger firms. After declining in November, factory gate prices returned to growth.

Business confidence slipped from November’s nine-month high, reflecting ongoing concerns around elevated costs, increased taxation, reduced international competitiveness, geopolitical uncertainty and potential government policy impacts.

“Further signs of growth emanated from the UK manufacturing sector before the turn of the year. Output rose for the third successive month and new order intakes improved, albeit slightly, for the first time since September 2024,” said Rob Dobson, director at S&P Global Market Intelligence. “The domestic market remained a positive spur to growth while new export business, despite having now fallen for almost four consecutive years, took a sizeable stride towards stabilising.”

“UK manufacturers benefited from several reduced headwinds towards the end of the year, as the negative impacts of the uncertainty surrounding the Autumn Budget, tariffs and the JLR cyber-attack all moderated,” added Dobson. “The start of 2026 will show if growth can be sustained after these temporary boosts subside. The base of the expansion needs to shift more towards rising demand and away from inventory building and backlog clearance. December’s interest rate cut will hopefully play some part in assisting this transition, encouraging manufacturers and their customers to increase spending and investment. Manufacturers remain uncertain on this score, with business optimism falling for the first time in three months in December.”

ALCHEMPro News Desk (SG)