NEWS 6 HYDRAULICS & PNEUMATICS February 2026 www.hpmag.co.uk Industrial Strategy expected to life UK Manufacturing in 2026 as cost pressures mount Britain’s engineering and manufacturing leaders are cautiously optimistic about the year ahead, with a new survey showing strong expectations that the forthcoming Industrial Strategy and sector-specific plans will help drive growth in 2026. This confidence is accompanied by increasingly urgent warnings about escalating business costs, particularly employment and energy, which many manufacturers now believe are approaching a critical point that could push investment abroad. The Make UK 2026 Senior Executive Survey, produced with PwC UK, reports that 57% of manufacturers expect a longterm Industrial Strategy and sector plans to have the biggest impact on growth this year. Almost two thirds say they are preparing to bring forward investment in response. The strongest investment priorities are new product development, with four in five companies planning to increase spending, followed by digital technologies, AI and automation at 76%. More than half expect to expand their product ranges and 42% intend to enter new export markets. The push into AI is also linked to commercial strategy, with over a third citing increased marketing activity as a key growth opportunity. Although a majority still consider the UK a competitive place to manufacture, sentiment is shifting. Twenty six per cent now view the UK as uncompetitive, and international perceptions are evenly balanced, with 39% of non-UK businesses seeing the UK as an unattractive investment location compared with 41% who view it favourably. Cost pressures dominate the challenges reported by manufacturers. Almost nine in ten expect employment costs to rise, 79% anticipate increases in material and input costs and two thirds foresee higher business rates. These pressures are influencing strategic decisions. Around 60% of companies say they would have cut or cancelled investment had business tax increases been introduced in the latest Budget, and 57% say they would have shifted investment overseas under those conditions. Make UK warns that domestic employment and energy costs are now threatening to reach a tipping point, despite global cost pressures playing a role. The organisation is calling for the Government to accelerate delivery of the Industrial Strategy, bring forward the planned business energy support scheme and extend it to as many companies as possible. It also wants greater stability and clarity around future employment regulation, particularly given the impact of increased National Insurance contributions and the Employment Reform Bill on recruitment and long-term planning. Stephen Phipson, Chief Executive of Make UK, said manufacturers have repeatedly demonstrated their resilience and ability to innovate but require a more supportive operating environment if they are to continue investing. He warned that the warning signs are now highly visible regarding the UK’s attractiveness for manufacturing and investment and urged the Government to deliver the changes it has promised. Cara Haffey, Leader of Industrials and Services at PwC UK, said manufacturers remain ambitious and focused on growth. She noted that the Industrial Strategy sits at the centre of this optimism but will take time to deliver results. Companies that concentrate on product innovation, technology adoption and stronger marketing activity are likely to benefit most. The overall picture is one of cautious optimism supported by clear growth plans, but undercut by mounting cost pressures that could undermine investment unless addressed promptly.
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