NEWS 6 HYDRAULICS & PNEUMATICS June 2025 www.hpmag.co.uk UK manufacturers reassess U.S as export market amid tariff concerns The United States has dropped out of the top three global growth markets for UK manufacturers for the first time, according to the latest Manufacturing Outlook survey by Make UK and BDO. This shift reflects growing unease within the sector, driven by increased trade barriers, geopolitical uncertainty, and weakening demand from across the Atlantic. The Q2 2025 survey reveals that UK manufacturers now place greater emphasis on Asia/Oceania and the Middle East when targeting export growth, marking a historic change in sentiment. For decades, the US had consistently ranked as a top destination— second only to the EU—but now sits in fourth place. The fall in favour comes amid a significant trade decline, with official figures showing a £2 billion drop in exports to the US in April alone, the sharpest monthly fall since records began in 1997. Concerns about the impact of tariffs are widespread. A separate Make UK survey found that six in ten manufacturers expect US-bound exports to be affected, while nearly two-thirds anticipate broader negative consequences for their businesses. Around 30% of companies are reviewing their supply chains, considering alternative sourcing strategies, yet only 4% say they are looking into setting up operations in the US—signalling a clear drop in confidence. Meanwhile, in the US, optimism among American manufacturers has also declined. According to the National Association of Manufacturers, sentiment is at its lowest since the pandemic, with 77% of companies citing trade uncertainty as their main concern. Despite these challenges, UK manufacturing output showed signs of recovery in the second quarter. Output bounced back to +9% from -1% in Q1, while export orders improved from +1% to +7%. Export strength helped cushion the impact of continued domestic weakness, where order balances remained negative at -1%, though this was still an improvement from -7% in the previous quarter. Projections for Q3 are tentatively optimistic, with output expected to rise to +11% and total orders to +13%. Export orders are forecast to climb to a balance of +22%, exceeding long-term averages. However, the positive momentum in output is not mirrored in investment activity. Capital spending intentions have been falling sharply since late 2024, and in Q2 dropped to just +2%, down from +5% in Q1 and +10% in Q4 last year. If this downward trend continues, Make UK warns that investment could turn negative in the second half of 2025, posing a threat to future growth and innovation in the sector. Compounding these concerns, growth forecasts for the manufacturing sector have been revised downward. After a flat year in 2024, the sector is now expected to shrink by 0.2% in 2025, with the projection for 2026 cut drastically from +1% to -0.5%. This suggests a prolonged period of stagnation or contraction, adding urgency to calls for government intervention. Seamus Nevin, Chief Economist at Make UK, said the figures highlight the severity of the challenges facing manufacturers: “While at first glance the headline numbers may not look too bad, manufacturers are facing a gathering storm of huge uncertainty in one of their major markets, a skills crisis and eyewatering energy costs which are providing a harsh reality for many. In response, it’s absolutely essential that the forthcoming industrial strategy takes bold measures to bring down the cost of energy and takes equally radical action to ensure companies can access the people they need to take advantage of a more competitive landscape. If these two issues are not addressed, then we will face the serious prospect of the UK accelerating into de-industrialisation.” His comments were echoed by Richard Austin, Head of Manufacturing at BDO, who noted: “This quarter’s results are a testament to the increasingly challenging landscape our British manufacturers are operating in. The forecasted decline in growth is concerning and the delayed industrial strategy won’t help to assuage uncertainty in the sector. That said, there remain pockets of positivity. Growing output levels are proof of manufacturers’ resilience and last month’s trade deals should remove barriers as UK companies seek new trading partners and opportunities for growth. As always, they need urgent clarity and targeted investment from the government if this recovery is to continue into next quarter.” While there are glimmers of strength in near-term output and export performance, the overall picture remains fragile. With the US retreating as a reliable export partner and investment intentions weakening, the sector’s future will increasingly depend on swift and decisive policy action to address structural challenges—particularly energy costs and workforce development. Without such intervention, the UK risks sliding further down the path toward de-industrialisation.
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