Manufacturers hold back on hiring and look to the Budget for action on costs
15/09/2026 MAKE UK
Last Manufacturing Outlook before the Budget shows recruitment slowing sharply despite improving confidence, orders and investment intentions
Key findings
· Recruitment balance falls sharply from +15% in Q2 to just +3% in Q3
· Manufacturing vacancies fall 6.2% on the previous quarter, according to the latest ONS data
· Workforce jobs fall by 81,000 in the year to March 2026, including 58,000 fewer employee jobs
· Manufacturers remain cautious ahead of further Employment Rights Act 2025 measures and amid high employment costs
· Energy costs remain a major barrier to growth, investment and job creation across UK manufacturing.
· Confidence, orders and investment intentions improve, but the recovery has yet to translate into stronger hiring
Manufacturers are holding back on recruitment as high employment costs and further regulatory change weigh on hiring decisions, despite signs of improving demand and confidence across the sector.
The latest Manufacturing Outlook survey, published by Make UK in partnership with accountancy firm S&W, shows the employment balance falling from +15% in the second quarter of 2026 to just +3% in Q3. Recruitment is therefore still positive overall, but growth has slowed to a near standstill.
The survey is reinforced by the latest ONS vacancy data, which shows manufacturing vacancies falling by 6.2% compared with the previous quarter. Workforce jobs fell by 81,000 in the year to March 2026, including 58,000 fewer jobs for employees.
The slowdown comes as manufacturers continue to absorb high employment, energy and other input costs. Further measures under the Employment Rights Act 2025 are due to come into force in October 2026, adding to the uncertainty facing firms as they decide whether to recruit.
Make UK warns that continued caution on hiring risks making it harder for manufacturers to bring new people into the sector and build the skills pipeline needed for future growth. It will shortly set out its priority asks for the sector for the Autumn Budget, calling for action to reduce the cost and regulatory pressures facing businesses and give firms greater confidence to invest, grow and recruit.
Fhaheen Khan, Senior Economist at Make UK, said:
“The sharp slowdown in recruitment shows that high employment, energy and regulatory costs are forcing firms to think twice before taking on new people.
“Manufacturing makes up ten per cent of the UK economy and could be vital to delivering the Prime Minister’s priorities. But our members can only grow and invest if the Autumn Budget brings those costs and burdens down.
“Without action, ministers risk shutting people out of well-paid manufacturing careers and weakening the skills base the country needs for future growth.”
Stephen Drew, Partner at S&W, commented:
"Manufacturers are becoming increasingly optimistic about their prospects, but caution remains a defining theme across the sector. Rising employment, energy and other costs continue to put pressure on margins, meaning many businesses are having to be highly selective about where they invest.
“Manufacturers want to invest, expand and take advantage of improving demand, but many are looking for greater certainty before making significant commitments. The improvement in confidence and growth forecasts is encouraging, but translating that momentum into sustained growth will require an environment that gives businesses the confidence to invest, recruit and plan for the long term."
A recovery that has yet to reach recruitment
The wider survey points to improving conditions. Business confidence rose for the first time since Q2 2025, while orders remained positive and manufacturers expect demand to strengthen towards the end of the year. Investment intentions also increased in Q3.
However, output momentum cooled sharply. The output balance fell from +26% in Q2 to +10% in Q3, although manufacturers forecast a recovery to +17% in Q4. Total orders fell from +18% to +13%, with a forward balance of +20%. UK orders outpaced exports in Q3 at +17% and +12% respectively.
Price pressures eased during the quarter but remain elevated. The UK prices balance fell from +36% in Q2 to +30% in Q3, while export prices fell from +29% to +24%. Both are expected to rise again in Q4, to +39% and +37% respectively, adding to the pressure on firms’ costs and hiring decisions.
The sector’s 2026 output growth forecast has been upgraded to 1.2%, from 0.4% in Q2, while the 2027 forecast has increased from 0.1% to 0.3%. Make UK argues that turning this improved outlook into jobs will depend on reducing the costs and uncertainty currently holding recruitment back.
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