A key indicator of the health of Britain’s manufacturing sector rose to its highest level since August 2024 in January, as new orders increased at the fastest pace in nearly four years, adding to signs of a recovery after a sluggish end to 2025.
The S&P Global Purchasing Managers’ Index (PMI) for UK manufacturing climbed to 51.8 in January from 50.6 in December, slightly above an earlier preliminary reading of 51.6.
Growth in new orders strengthened markedly, with the index rising to 53.2 from 50.2, its highest level since February 2022. The improvement was driven by the first expansion in export orders in four years, reflecting stronger demand from Europe, the United States, China and other emerging markets.
“UK manufacturing got off to a solid start to 2026, showing encouraging resilience despite rising geopolitical tensions,” said Rob Dobson, director at S&P Global Market Intelligence.
Business confidence also rebounded, reaching its highest level since before the 2024 Autumn Budget, Dobson added.
Prime Minister Keir Starmer sought to build closer ties with businesses before taking office in July 2024, but many firms were disappointed by sharp increases in employment taxes introduced in Finance Minister Rachel Reeves’ first budget in October 2024.
Sentiment remained weak in the run-up to her second budget in November 2025 but has improved since, as most of the latest tax increases have been deferred and are less heavily focused on businesses.
Starmer and Reeves have said they believe the economy can outperform the 1.4% growth forecast for 2026 by the government’s independent Office for Budget Responsibility.
Despite the improvement in activity, the PMI showed manufacturing employment continued to decline, though at the slowest pace since employment taxes were raised in October 2024. Meanwhile, input costs rose at their fastest rate since August 2025.
Manufacturers reported higher costs for chemicals, energy, food products, freight, metals, packaging and plastics, as well as suppliers passing on higher labour costs following last year’s increases in employment taxes and the minimum wage, S&P said.