UK manufacturers are slowing recruitment despite growing confidence in the sector, with high employment and energy costs and the prospect of further regulation weighing on hiring decisions ahead of the Autumn Budget.
The latest Manufacturing Outlook survey from Make UK and S&W found that the employment balance fell sharply from +15% in the second quarter of 2026 to just +3% in the third quarter.
The decline comes alongside a 6.2% quarterly fall in manufacturing vacancies, according to the latest Office for National Statistics data. Workforce jobs across the sector fell by 81,000 in the year to March 2026, including 58,000 fewer employee jobs.
Make UK said manufacturers remained cautious about recruitment as they absorbed higher employment, energy and other input costs. Further measures under the Employment Rights Act 2025 are also due to take effect in October.
The survey of 269 manufacturing companies found that wider expectations had improved. Business confidence rose for the first time since the second quarter of 2025, while orders remained positive and investment intentions increased.
However, output momentum weakened. The output balance fell from +26% in Q2 to +10% in Q3, although manufacturers expect it to recover to +17% in the final quarter of the year.
Total orders also eased, from +18% to +13%, while manufacturers expect the balance to reach +20% in Q4. UK orders outperformed exports during the quarter, with balances of +17% and +12% respectively.
Manufacturers’ expectations for output growth have nevertheless improved. Make UK has upgraded its forecast for UK manufacturing output growth in 2026 from 0.4% to 1.2%, while its forecast for 2027 has risen from 0.1% to 0.3%.
Fhaheen Khan, Senior Economist at Make UK, said the slowdown in recruitment showed that employment, energy and regulatory costs were influencing firms’ decisions to take on workers.
“Manufacturing makes up 10% of the UK economy and could be vital to delivering the Prime Minister’s priorities,” he said. “But our members can only grow and invest if the Autumn Budget brings those costs and burdens down.”
Energy costs remain a particular concern for manufacturers, with Make UK warning that they are constraining investment as well as recruitment.
