UK business optimism rises as manufacturing activity climbs in January

(Alliance News) - Job cutting in the UK's manufacturing sector fell to its weakest since job losses started 15 months ago as growth in activity in the sector accelerated in January, data showed Monday.

The S&P Global UK manufacturing purchasing managers' index jumped to a 17-month high of 51.8 points in January, from 50.6 points in December, beating the first estimate of 51.6 points. Climbing above the neutral 50-point mark separating growth from contraction, it indicates the pace of growth in the UK's manufacturing sector sped up in January.

Notably, UK business optimism was at its highest level since before the 2024 autumn budget, with 58% of manufacturers expecting output to rise over the next 12 months. S&P said that confidence reflected hopes for a recovery in market confidence and a reduction in geopolitical uncertainty.

"Production volumes expanded in both the consumer and investment goods industries, but contracted in the intermediate goods category. Data broken down by company size suggested the expansion was driven by large-sized manufacturers, as small & medium enterprises saw production decline for the third month in a row," S&P Global said.

Rob Dobson, director at S&P Global Market Intelligence, noted that "UK manufacturing made a solid start to 2026," citing resilience despite geopolitical tensions. He said rates of output and order book growth accelerated while new export businesses rose for the first time in four years, with Europe, China and the US the main recipients.

He added: "There was also a positive bounceback in business confidence, which rose to its highest level since before the 2024 Autumn budget, as manufacturers focused on opportunities lying ahead despite persistent concerns about the geopolitical environment, government policy and tariff tensions.

"There was also encouraging news on the jobs front. Although the strongest rise in new business for almost four years was insufficient to fully quell reductions to staff headcounts, the rate of cutting slowed to its weakest since job losses started 15 months ago. Cost pressures are creeping higher though, as the pass through of the increased Minimum Wage and employer national insurance contributions continue to work through the supply chain alongside the rising costs for commodities such as metals."

Meanwhile, January had mild accelerations in the rates of increase in input costs and selling prices, with companies linking higher input prices to rising raw material charges and the pass through of increased costs at suppliers.

The PMI survey draws upon a panel of 650 UK-based manufacturing companies, with responses collected between January 12 and 27.

Final UK services and composite data will be released on Wednesday.

By Tom Budszus, Alliance News slot editor

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