UK manufacturers are warning that high energy costs, tax pressures and skills shortages are limiting their ability to invest in automation, digital technology and other measures needed to modernise production.
Family-owned manufacturers, which account for 65 per cent of UK manufacturing businesses, contribute an estimated £94bn to the economy and support around 1mn jobs. But a new report from Make UK and Bishop Fleming suggests rising costs and uncertainty are making it harder for these businesses to commit to the long-term investment needed to improve productivity and competitiveness.
Almost eight in 10 family-owned manufacturers surveyed said they were concerned about changes to inheritance tax and Business Property Relief, which could increase the cost of transferring businesses between generations.
The report found that 59% of manufacturers identified energy costs as their biggest barrier to growth, while 47% cited taxation. UK industrial electricity prices are the highest in the G7, according to Make UK.
The pressures are beginning to influence ownership decisions. More than one in five family-owned manufacturers said they were considering a sale to an overseas buyer, while 18% were considering a UK-based sale.
Make UK warned that such moves could result in the loss of domestic manufacturing capacity, specialist expertise and established supply chains at a time when the government is seeking to strengthen the country’s industrial base.
“Family-owned manufacturers are not a niche part of the economy,” said Fhaheen Khan, Senior Economist at Make UK. “They anchor skilled jobs, long-term investment and the industrial know-how Britain needs to make reindustrialisation a reality.”
The findings come as ministers seek to accelerate the government’s industrial strategy and encourage greater use of public procurement to support British industry. Make UK said the success of that strategy would depend on whether policy created conditions in which family-owned manufacturers could continue to invest and transfer businesses to the next generation.
Neil Davy, Chief Executive of Family Business UK, said the findings added to evidence that changes to Business Property Relief were already affecting family-owned businesses and the wider economy.
“Manufacturing is a sector built on long-term thinking. Family-owned manufacturers invest across generations, not electoral cycles, and their contribution to Britain’s economic resilience, industrial capability and regional prosperity cannot be easily replaced,” he said.
Davy said it was particularly concerning that manufacturers were reporting disrupted succession plans and delayed investment as a result of the reforms.
The prospect of family businesses being sold to overseas buyers should also concern policymakers, he added, arguing that government should be creating conditions that allow businesses to invest and pass ownership to the next generation rather than making succession more difficult.
Succession is increasingly being viewed as a broader business issue rather than simply a tax matter, according to Bishop Fleming.
“What struck us most from both the survey and our conversations with manufacturing leaders is that succession planning is no longer simply a tax discussion,” said Dan Phillips, the firm’s Head of Manufacturing.
Business owners were also focused on future leadership, attracting skilled workers, protecting jobs and maintaining the long-term viability of companies they had built over decades, he said.
Skills shortages are adding to the pressure. Some 32% of manufacturers said a lack of technical skills was a barrier to their business, while 63% said they planned moderate to significant investment in training.
Make UK warned that rising apprenticeship costs and delays to funding reforms could weaken one of the main routes into skilled manufacturing jobs.
The report also found that 91% of manufacturers had yet to see benefits from the government’s Industrial Strategy, a year after its introduction. Make UK said the strategy remained welcome but needed to translate into practical support on energy, taxation, skills, finance and investment.
The industry body is calling for the government to reconsider recent inheritance tax changes, including the cap on Business Property Relief, with 42% of manufacturers surveyed saying they wanted the changes reversed.
It is also seeking lower industrial energy costs, a review of employer National Insurance contributions, reforms to apprenticeship funding and stronger investment incentives, including extending capital allowances to software and refurbished second-hand machinery.
The research is based on a survey of 127 manufacturing businesses conducted between May and June 2026, around two-thirds of which identified as family-owned. The findings were supplemented by interviews with manufacturing leaders.
