(Jan 2): UK manufacturing output grew for a second consecutive month in December, according to a closely watched survey suggesting the sector is shaking off pre-budget fears of potential tax rises and the impact of the Jaguar Land Rover (JLR) shutdown.
S&P Global said its manufacturing purchasing managers’ index increased to 50.6, up from 50.2 the month before. While the reading was below a preliminary estimate of 51.2 announced in mid-December, it was still the highest in 15 months.
The index increased for a third month in a row, registering a reading above 50 — which indicates growth — for the second straight month. After new orders stood still in November, firms reported an increase for the first time since September 2024, driven by consumer goods producers. Output rose across all sectors concurrently for the first time since August 2024.
“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,” Rob Dobson, director at S&P Global Market Intelligence, said.
In the run-up to Chancellor of the Exchequer Rachel Reeves’ Nov 26 budget, businesses held off on making investment decisions amid concern about potential tax rises after her first budget a year earlier raised levies by £40 billion a year, with the burden mainly hitting companies.
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While the sector was supported by domestic buyers, overseas orders continued to fall for a forty-seventh month. Firms reported some signs that demand from the US and the Middle East is recovering after the shock sparked by US President Donald Trump’s tariff war.
Production in December was boosted by efforts to build up stocks of finished goods and clear order backlogs, the survey also showed.
However, there are some early signs that manufacturers are questioning whether the current boost will extend into 2026. S&P’s business optimism indicator fell for the first time in three months in December due to fears that spending by firms and consumers will remain subdued and amid an increase in price pressures.
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“The start of 2026 will show if growth can be sustained after these temporary boosts subside,” Dobson said.
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