The UK Factory Sector saw its fastest growth in 15 months during December 2025, signalling a significant upturn. The S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) rose to 50.6, beating November’s 50.2 reading and marking the second consecutive month of expansion for the UK Factory Sector, following 13 months of contraction. This positive development for the UK Factory Sector is a welcome sign for UK manufacturing growth.
UK Factory Sector Reaches Milestone Growth
A PMI figure above 50.0 indicates growth. December’s reading reached its highest point in 15 months, based on data collected from December 4 to December 18, 2025. This recent uptick follows a year of decline for the UK Factory Sector, offering a hopeful sign for UK business confidence and contributing to overall UK manufacturing growth.
Key Drivers of the UK Factory Sector Upturn
Several factors contributed to this factory sector expansion. Manufacturing output increased for the third consecutive month, and crucially, new orders increase within the UK Factory Sector, marking the first rise since September 2024. Domestic demand provided a strong push, while export orders showed signs of stabilization. Employment trends also moved closer to stability. Manufacturers also benefited from reduced headwinds, with lessening uncertainty surrounding the Autumn Budget and less impact from tariffs. The cyber-attack on Jaguar Land Rover (JLR) moderated, and its recovery began to lift the sector, a key element in the UK Factory Sector’s performance and a positive indication of JLR recovery impact.
Uneven Recovery: Large Firms Lead the UK Factory Sector
However, growth was not uniform across the UK Factory Sector. The expansion was heavily skewed towards large manufacturers, while small and medium-sized companies still reported downturns in both output and new orders. This disparity highlights a mixed picture within the broader UK Factory Sector and the United Kingdom‘s manufacturing landscape.
Lingering Concerns and Challenges for the UK Factory Sector
Despite the positive headline, concerns persist for the UK Factory Sector. UK business confidence dipped in December, following a nine-month high in November. Manufacturers cited several worries, including high costs, increased taxation, reduced international competitiveness, and geopolitical uncertainty. The potential impact of government policy also remains a factor for the UK Factory Sector.
Furthermore, input cost inflation accelerated, with manufacturers reporting rising prices for electronics and metals, alongside increased energy costs. Factory gate prices resumed their upward trend after a dip in November. The recent growth was also partly due to stock building and clearing backlogs of work, suggesting it is not solely driven by rising demand. The UK Factory Sector needs to shift more towards genuine demand increases to ensure sustainable factory sector expansion.
The Shadow of Past Disruptions on the UK Factory Sector
The Jaguar Land Rover cyber-attack had a significant impact, causing a major production halt, disrupting supply chains for weeks, costing the company millions, and affecting thousands of supplier businesses. The moderation of this impact, including the JLR recovery impact, is now a positive factor for the UK Factory Sector, having removed a significant drag and contributing to the December PMI figure.
Outlook for 2026 and the UK Factory Sector
The start of 2026 will test the growth trajectory for the UK Factory Sector, with the sustainability of this expansion uncertain as temporary boosts subside. December’s interest rate cut might help demand, potentially encouraging more spending and investment. However, manufacturers express caution, worrying about future costs and competitiveness. Sustaining growth requires a shift from inventory building to rising demand. The United Kingdom faces ongoing global trade challenges, including tariffs and complex trade issues, which continue to affect the UK Factory Sector.
Conclusion for the UK Factory Sector
December provided welcome news for the UK Factory Sector, with the PMI reaching a 15-month high, indicating resilience. Output and new orders increase are finally improving, suggesting potential for UK manufacturing growth. Yet, significant challenges remain for the UK Factory Sector. The uneven nature of the growth is clear, and concerns over costs and future demand are prominent. Manufacturers look to 2026 with cautious optimism. Sustained, demand-led growth is crucial for the UK Factory Sector to determine its true recovery, alongside the trending direction of global markets.
