UK Manufacturing PMI Edges Higher as Economic Headwinds Begin to Ease

UK manufacturing is showing signs of modest momentum as fresh data reveals improved activity levels heading into 2025. The December manufacturing PMI climbed to 50.6 from November’s 50.2, marking the highest reading in 15 months and signaling a shift toward cautious optimism across the sector.

What’s Driving the Uptick?

Several factors have converged to support this incremental improvement. The stabilization of policy uncertainty following recent budget announcements has reduced business anxiety. Meanwhile, supply chain disruptions from the Jaguar Land Rover cyberattack have largely been resolved, allowing production to normalize. On the external front, recovering global demand has provided additional tailwinds for UK exporters, though the gain remains modest.

According to analysis from Pantheon Macroeconomics, most sub-components of the December manufacturing PMI expanded, suggesting broad-based strength rather than isolated strength. This breadth gives economists reason to believe the improvement could persist into the first quarter of 2025.

But Headwinds Remain

However, the sustainability of this rebound faces significant challenges. Elevated borrowing costs continue to constrain capital investment and business expansion plans. Equally concerning are looming uncertainties around tariff policies, which could disrupt supply chains and dampen demand if they escalate in 2026.

The Bottom Line

While UK manufacturing activity is poised to continue improving in the near term, the gains are likely to be gradual rather than transformative. Market analysts caution that the PMI momentum may eventually plateau as cost pressures and policy uncertainties reassert themselves, limiting the upside potential for sustained strong growth throughout the year.