The UK manufacturing sector has continued where it left off in May, reaching a four-month high as we enter the second half of 2025, new figures released today show.
According to the latest S&P Global UK Manufacturing Purchasing Managers’ Index (PMI), industry saw its rates of decline in output, new orders and employment all slow. However, the UK manufacturing sector remained below the neutral 50.0 mark (which denotes growth or contraction) for nine straight months.
On a positive note, business optimisim among manufacturers experienced an uptick in June, hitting a four-month high, with 46% of companies polled anticipating production to be higher in one year’s time (compared to just 10% expecting a decline).
The cyclically sensitive new orders-to-finished goods ratio (which tends to move in advance of production) also rose sharply to its highest level since August 2024.That said, companies remained concerned that government policy, tariff uncertainty and heightened geopolitical tensions could derail any moves towards greater market stabilisation.
Manufacturing employment was also lowered to reduce excess capacity at factories. Backlogs of work decreased for the thirty-eighth month in a row, with the rate of ontraction remaining substantial. Stock holdings were also streamlined in June, leading to reductions in both purchased and finished goods inventories.
Meanwhile, in the Eurozone…
The HCOB Eurozone Manufacturing PMI was 49.5 in June, up a fraction on May’s 49.4 and a 34-month high for the bloc.
Ireland and Greece once again posted the strongest improvements in overall business conditions, with Spain and the Netherlands also registered strengthening manufacturing. In fact, the Netherlands posted the fastest upturn since May 2024. In contrast, Austria, Italy and France all registered faster declines in manufacturing sector conditions. Goods producers in Germany also signalled a sustained downturn in June, but the speed of contraction was only marginal and the least marked since August 2022.
Commenting on the latest UK Manufacturing PMI figures, Rob Dobson, Director at S&P Global Market Intelligence “Although the downturn in UK manufacturing continued in June, the latest PMI survey provides signs of conditions stabilising. Production, new orders and employment all fell at slower rates, while business optimism picked up to a four-month high. The orders-to-inventory ratio, a reliable bellwether of future production trends, also climbed sharply to its highest since August 2024. Inflation of both input costs and selling prices meanwhile nudged lower to hint at a softening inflation trend.
“That said, any hoped for stabilisation remains fragile and subject to potential headwinds that could severely impact demand, supply chain reliability and future growth prospects, as manufacturers continue to caution their optimism with concerns about heightened geopolitical tensions, weak global markets, tariff uncertainties and fears over the direction of future government policy.”
Boudewijn Driedonks, partner at McKinsey & Company commented: “UK manufacturing is starting to climb out of the valley, with the pace of contraction slowing. But it’s not back on solid ground. Demand continues to be lukewarm, while inflationary pressures lurk. Manufacturers will be looking at how to balance margins against volume.
“Global competitiveness remains a major hurdle, with the forty-first consecutive monthly drop in export orders, highlighting the pressure on international performance.
“As global trade flows begin to rebalance and trade policies change, new opportunities arise. This could be an opportunity for UK manufacturers to be surgical about where they can compete on the global stage. Many will be doubling down on their strengths, to compete in under penetrated export markets.”
Louise Smith, Head of Industrial Manufacturing and Services at advisory firm Interpath, said: “A rise to 47.7 is a step in the right direction, but let’s be clear: UK manufacturing is still under pressure. Whilst the latest PMI suggests improving sentiment, the sector remains in contraction and continues to face a barrage of challenges such as persistently high input costs, rising labour costs following NIC and NMW increases, tariff uncertainty and geopolitical instability, including oil price rises as a result of the ongoing Middle East turmoil.
“We’re seeing a clear divergence in how firms are responding, with some businesses not only adapting to the challenging environment but also actively exploring both M&A and potential growth opportunities. They acknowledge that waiting for ideal market conditions may be unrealistic and merely staying afloat won’t suffice. For those with a well-defined strategy and strong leadership, this environment holds potential for growth.”
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