Last Manufacturing Outlook before the Budget shows recruitment
slowing sharply despite improving confidence, orders and
investment intentions
Key findings
- Recruitment balance falls sharply
from +15% in Q2 to just +3% in Q3
- Manufacturing vacancies fall 6.2%
on the previous quarter, according to the latest ONS data
- Workforce jobs fall by 81,000 in
the year to March 2026, including 58,000 fewer employee jobs
- Manufacturers remain cautious ahead
of further Employment Rights Act 2025 measures and amid high
employment costs
- Energy costs remain a major barrier
to growth, investment and job creation across UK manufacturing.
- Confidence, orders and investment
intentions improve, but the recovery has yet to translate into
stronger hiring
Manufacturers are holding back on recruitment as high employment
costs and further regulatory change weigh on hiring decisions,
despite signs of improving demand and confidence across the
sector.
The latest Manufacturing Outlook survey, published by Make UK in
partnership with accountancy firm S&W, shows the employment
balance falling from +15% in the second quarter of 2026 to just
+3% in Q3. Recruitment is therefore still positive overall, but
growth has slowed to a near standstill.
The survey is reinforced by the latest ONS vacancy data, which
shows manufacturing vacancies falling by 6.2% compared with the
previous quarter. Workforce jobs fell by 81,000 in the year to
March 2026, including 58,000 fewer jobs for employees.
The slowdown comes as manufacturers continue to absorb high
employment, energy and other input costs. Further measures under
the Employment Rights Act 2025 are due to come into force in
October 2026, adding to the uncertainty facing firms as they
decide whether to recruit.
Make UK warns that continued caution on hiring risks making it
harder for manufacturers to bring new people into the sector and
build the skills pipeline needed for future growth. It will
shortly set out its priority asks for the sector for the Autumn
Budget, calling for action to reduce the cost and regulatory
pressures facing businesses and give firms greater confidence to
invest, grow and recruit.
Fhaheen Khan, Senior Economist at Make UK, said:
The sharp slowdown in recruitment shows that high employment,
energy and regulatory costs are forcing firms to think twice
before taking on new people.
Manufacturing makes up ten per cent of the UK
economy and could be vital to delivering the Prime Minister's
priorities. But our members can only grow and invest if the
Autumn Budget brings those costs and burdens down.
Without action, ministers risk shutting people out of
well-paid manufacturing careers and weakening the skills base the
country needs for future growth.
Stephen Drew, Partner at S&W,
commented:
"Manufacturers are becoming increasingly optimistic about
their prospects, but caution remains a defining theme across the
sector. Rising employment, energy and other costs continue to put
pressure on margins, meaning many businesses are having to be
highly selective about where they invest.
Manufacturers want to invest, expand and take advantage of
improving demand, but many are looking for greater certainty
before making significant commitments. The improvement in
confidence and growth forecasts is encouraging, but translating
that momentum into sustained growth will require an environment
that gives businesses the confidence to invest, recruit and plan
for the long term."
A recovery that has yet to reach recruitment
The wider survey points to improving conditions. Business
confidence rose for the first time since Q2 2025, while orders
remained positive and manufacturers expect demand to strengthen
towards the end of the year. Investment intentions also increased
in Q3.
However, output momentum cooled sharply. The output balance fell
from +26% in Q2 to +10% in Q3, although manufacturers forecast a
recovery to +17% in Q4. Total orders fell from +18% to +13%, with
a forward balance of +20%. UK orders outpaced exports in Q3 at
+17% and +12% respectively.
Price pressures eased during the quarter but remain elevated. The
UK prices balance fell from +36% in Q2 to +30% in Q3, while
export prices fell from +29% to +24%. Both are expected to rise
again in Q4, to +39% and +37% respectively, adding to the
pressure on firms' costs and hiring decisions.
The sector's 2026 output growth forecast has been upgraded to
1.2%, from 0.4% in Q2, while the 2027 forecast has increased from
0.1% to 0.3%. Make UK argues that turning this improved outlook
into jobs will depend on reducing the costs and uncertainty
currently holding recruitment back.
Notes to editors
- The survey of 269 companies took
place between July and August 2026.
- Vacancy data: Office for National
Statistics, Vacancies and jobs in the UK.
- Sector growth forecasts source:
Oxford Economics.
- Employment Rights Act 2025 measures
due to come into force in October 2026 cover employment tribunal
time limits, sexual harassment, third-party harassment and
strengthened trade union rights.
