Growth of UK manufacturers at lowest level in five months amid two-year high employment

Key Points

• The S&P Global UK Manufacturing PMI dropped to 51.7 in August, down from 51.9 in July and the lowest level since records began in March 2011.
• August marked the 10th straight month of growth, but growth was the slowest since March.
• Manufacturing production increased, buoyed by increased orders from domestic and overseas markets, in a fifth consecutive month.
• The gap widened between larger and medium sized companies, with growth for the larger companies, and declining output and demand for the smaller companies.
• The slowdown was driven by weaker stocks activity, some of which was related to the uncertainty in energy prices since the Iran crisis.
• The sector added jobs for the fifth month in a row at its strongest rate since 2024.
• Business confidence rose to a six-months high.
• Economic data from S&P Global Market Intelligence’s Rob Dobson was not so positive, stating the sector had “lost traction” but was overall “broadly optimistic.
• Matt Swannell of the EY Item Club pointed to the prospect of renewed inflation and increased energy costs as possible dangers to manufacturers and households.
• Middle East tensions are the biggest concern for the outlook in the sector.

London (Britain Today News) September 01, 2026 — Growth across Britain’s manufacturing sector slowed to a five-month low in August, according to the latest S&P Global UK Manufacturing PMI, even as factories reported their fastest pace of hiring in two years, official survey data published on Monday showed.

What did the latest S&P Global UK Manufacturing PMI show?

The headline S&P Global UK Manufacturing Purchasing Managers’ Index eased to 51.7 in August, down from 51.9 the previous month. Any reading above the 50.0 threshold signals expansion, while a figure below it points to contraction. Although the index remained comfortably in growth territory, the rate of expansion was the softest recorded since March, suggesting the sector’s recovery, while intact, is losing some of its earlier momentum.

Why did manufacturing growth slow to a five-month low?

August marked the tenth month in succession in which UK manufacturing activity has expanded, extending a run of growth that began late in 2025. However, the pace of that expansion has now eased for two consecutive months. Survey compilers pointed to a combination of softer order growth and more cautious purchasing behaviour among manufacturers as the principal reasons behind the slowdown, rather than any single dramatic shift in trading conditions.

How did factory output and new orders perform in August?

Output at UK factories increased for a fifth month running, with producers citing stronger inflows of new work from both domestic and overseas customers. Export demand, in particular, was reported to be holding up despite ongoing global economic uncertainty. Even so, the rate at which new orders were being placed slowed compared with July, tempering the overall pace of production growth across the sector.

Why is there a widening gap between smaller and larger manufacturers?

One of the more striking features of the August data was a growing divergence in fortunes depending on company size. While medium-sized and larger manufacturers continued to report rising output and firm demand, smaller producers told a different story.

How are smaller manufacturers being affected?

Smaller firms recorded falling output and weaker demand for new work during the month, according to the survey. This points to a two-speed recovery within the sector, in which larger companies — often better placed to absorb higher costs and secure bigger contracts — are pulling ahead of smaller rivals that have less room to manoeuvre.

Are medium and large manufacturers still expanding?

Yes. Medium-sized and larger manufacturers continued to expand output through August, underlining that the overall slowdown in the headline index was not felt evenly across the industry. This unevenness is likely to keep policymakers focused on the specific pressures facing smaller producers in the months ahead.

Why did manufacturers cut back on stock purchasing?

The survey found that weaker purchasing of stocks by manufacturers was a further factor behind the slowdown. This was partly attributed to a cautious approach among producers as energy prices remained volatile in the wake of the conflict in Iran. Rather than building up inventories of raw materials and components, many firms appear to have opted to hold back, wary of committing to purchases while energy costs remain unpredictable.

What did Rob Dobson say about the state of UK manufacturing?

Commenting on the figures, Rob Dobson, director at S&P Global Market Intelligence, said the rate of expansion across UK manufacturing had cooled during August, with both output and new order growth losing traction. He added that manufacturers had nonetheless reported a positive outlook for the year ahead, and that business confidence had risen to a six-month high alongside the strongest job creation in two years.

Dobson suggested the slowdown reflected a reduced emphasis on precautionary stockbuilding as economic uncertainty gradually eases, rather than a fundamental weakening in demand. He noted that both domestic and overseas clients continued to show a willingness to spend, albeit while exercising a relatively high degree of caution.

Why did hiring reach its fastest pace in two years despite slower growth?

Perhaps the most encouraging element of the August survey was employment. Hiring across the manufacturing sector rose for a fifth consecutive month, and did so at the fastest rate since 2024. This came even as output and order growth eased, indicating that manufacturers remain confident enough about longer-term trading conditions to keep expanding their workforces.

The combination of slower headline growth alongside stronger hiring suggests firms are looking beyond short-term fluctuations and positioning themselves for improved conditions over the coming year.

What risks does the Middle East conflict pose to UK manufacturers?

The outlook for the sector remains vulnerable to developments in the Middle East, particularly through their effect on energy costs. Volatility in oil and gas prices linked to the conflict in Iran has already been cited as a factor behind manufacturers’ more cautious approach to stock purchasing, and further disruption could feed through into higher business costs across the industry.
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What did Matt Swannell of the EY Item Club say about the outlook?

Matt Swannell, chief economic adviser to the EY Item Club, struck a more cautious tone, warning that manufacturers could face a difficult period as the economic consequences of the conflict in Iran work their way through into business costs and household finances.

He said higher energy costs would be a particular headwind, pointing to a recent resurgence in oil and gas prices that is feeding through into higher costs for businesses. Swannell also warned that a pick-up in inflation would squeeze households’ spending power, adding that developments in the Middle East remained the “main wildcard” and a key source of uncertainty for business more broadly.

What does this mean for the UK economy going forward?

The August figures illustrate two competing forces at work within Britain’s industrial base. On one hand, improving business confidence and the strongest hiring in two years suggest manufacturers expect conditions to strengthen over the coming months. On the other, higher energy prices and the prospect of renewed inflationary pressure threaten to dampen demand just as the sector’s recovery matures.

For smaller manufacturers in particular, the combination of softer order books and rising input costs could make the months ahead more testing, even as larger competitors continue to grow. Whether the wider sector can sustain its ten-month run of expansion is likely to depend heavily on two factors: whether volatility in energy markets eases, and whether the improved confidence reported by manufacturers translates into firmer order books in the autumn.