UK Factory Activity Climbs to Peak Performance Last Seen in August 2024

The United Kingdom’s manufacturing sector delivered robust momentum in January 2026, with key activity indicators reaching their strongest position in months. The final Manufacturing Purchasing Managers’ Index (PMI) for the month surged to 51.8, climbing from December’s 50.6 reading and exceeding the preliminary estimate of 51.6. This uptick reflects a significant turnaround in business activity, underpinned by the most substantial surge in incoming orders witnessed in nearly four years.

Export Orders Drive New Growth Momentum

The most striking development emerged in the new orders sub-index, which jumped sharply from 50.2 to 53.2—the strongest level since February 2022. What makes this particularly noteworthy is that export orders finally returned to growth territory for the first time in four years, signaling improved international demand for British manufactured goods. According to data from Jin10, this expansion reverses the prolonged weakness that has characterized overseas order flows since August 2024, when the sector faced significant headwinds.

Rob Dobson, Director at S&P Global Market Intelligence, highlighted the shift in market sentiment: “UK manufacturing has started 2026 on a solid footing, showing encouraging resilience. Business confidence has also positively rebounded to its highest level since the autumn 2024 budget.” This recovery in business sentiment reflects growing optimism among manufacturers about near-term prospects and demand conditions.

Employment and Cost Pressures Remain Mixed

On the employment front, manufacturing jobs continued their downward trajectory, though the pace of decline has slowed considerably. The latest figures show the smallest contraction rate recorded since employment taxes were raised in October 2024, suggesting that businesses may be stabilizing their workforce decisions despite broader economic uncertainty.

However, manufacturers face mounting cost pressures that could temper near-term margins. Input costs surged to their highest level since August 2025, driven by elevated raw material prices and supply chain complexities. This cost inflation represents a significant challenge to profitability, even as demand conditions improve and business confidence rebounds.

The mixed signals from January’s manufacturing data paint a picture of cautious optimism: robust order momentum and recovered export demand sit alongside persistent employment weakness and rising cost burdens. The sector’s ability to navigate these conflicting pressures will likely determine whether this recent momentum can be sustained through the first quarter of 2026.