The only constant is change… that’s very much the feeling within manufacturing as we enter the final days of 2025. It’s once again been a year full of disruption and challenges for the sector and here, we speak to the industry’s most senior individuals to get their take on the year that was in our 2025 review of manufacturing, and gauge their thoughts on what to expect in 2026.
The good news was that the sector welcomed the launch of the long-awaited Industrial Strategy back in June. Under the ten-year strategy the government outlined plans to cut the bills of electricity-intensive manufacturers by up to 25% from 2027, a move it said could benefit more than 7,000 businesses. While response to the strategy’s launch was mostly positive, it wasn’t without criticism, particularly from the SME community, which claimed the strategy did not do enough to assist smaller businesses that are experiencing difficulties today.
Since April, manufacturing has been living with the somewhat fluid situation around tariffs introduced by the Trump administration in the US. The tariffs weakened UK manufacturing by lowering demand for exports — especially in automotive, steel, aluminium and chemicals — spurring output declines, job risks and supply-chain disruption.
Looking at specific sectors, the automotive sector was severely impacted by a major cyber attack at JLR in September, which halted production for several weeks and sent shock waves up and down the automotive giant’s supply chain. Not only that but at the start of December, European car executives issued further warnings that production could grind to halt due to Dutch chipmaker Nexperia clashing with its former Chinese owner.
It was also a challenging year for the steel industry as output this year fell to its lowest level since the 1930s. With import dependency also hitting a record high, the sector was described as being at a “tipping point” and is in “a fight for survival”.
There were flashes of resilience and some sectors rebounded in Q3 as many firms enter 2026 in a mood of cautious optimism. Indeed, in November S&P Global UK Manufacturing PMI revealed that output rose for a second successive month and new business levels steadied after more than a year of decline. Continued innovation and reshoring trends could well spur growth in niche, high-value sectors. Persistent global economic uncertainty, supply chain volatility and labour shortages will no doubt continue to pressure firms next year but growth will still be possible for well-positioned businesses willing to invest in digital technology.
Here, key individuals from across the manufacturing sector give their thoughts on 2025 and look ahead to 2026.
As we leave 2025 and usher in a New Year, as the saying goes ‘there’s some good news and some bad news’. The last 12 months have seen yet another tumultuous period where the resilience that is now hard wired into manufacturing as a sector was fully on display again.
Domestically there have been the challenges from energy bills that remain eye wateringly high for many businesses, while the full impact of the increase in National Insurance Contributions was felt for the first time. There was also the chaotic lead up the Budget when it seemed companies were being marched up the hill for yet more tax rises only to be largely marched down. If that were not enough, overseas they have had to cope with an erratic US President flip flopping from one decision on tariffs to the next.
Yet, despite all of that, Make UK’s final two quarterly surveys of the year showed a fairly positive picture, with the forward looking indicators for the first quarter of 2026 looking especially strong.
Looking forward to 2026, each year Make UK publishes a survey of senior executives in conjunction with PWC. This SWOT analysis looks at the broad brush opportunities and risks in the year ahead and is a valuable snapshot across the sector.
The standout positive from the 2026 Survey to be published in January shows manufacturers believe the introduction of an Industrial Strategy will have the biggest impact on their growth prospects with a majority of companies believing the opportunities for their business to succeed outweigh the risks this year according to a major survey published today.
As well as the benefits from an industrial Strategy, the survey shows that, despite the current challenges from escalating costs and a potential trade war, a majority of manufacturers believe that overall, the UK remains a competitive place in which to manufacture. It also shows expanding into new markets, developing new products and digital technologies and AI are the focus of their investments.
However, the survey shows signs the escalating costs manufacturers are facing, especially employment and energy costs, are threatening a tipping point whereby the UK will see investment plans cancelled or, shifted overseas as a result.
In response, Make UK is now urging government to speed up the pace of delivery on industrial strategy, as well as bringing forward the much vaunted business energy support scheme as the current proposed introduction in 2027 is too late. Make UK is also campaigning for the scheme to be expanded right across the sector so the broadest possible number of companies are covered. We also need to see greater stability and clarity regarding employment legislation and costs.
Despite these challenges, manufacturers have demonstrated their resilience over and over again in recent years and, those that remain innovative and are prepared to invest in new technologies and products, expanding their markets and, most crucially, invest in their people will continue to thrive.
Excellent and resilient Made in Britain manufacturers have navigated their way through a tough and sometimes confusing year to reach the higher ground of the UK’s productive economy, but there is no doubt that 2025 hasn’t been the easiest year for British manufacturers. The looming fear of tariffs from the US lasted for most of the year, prompting a fundamental rethink of how our 2,200 Made in Britain members exported their products and goods, and that’s without looking at the concerns businesses have much closer to home.
However, in the midst of widespread negativity about Britain’s position on the global stage, it is vital for us to look at the facts of the matter. The UK rose to 11th in the global manufacturing rankings in 2025, with output being valued at $279bn according to Make UK’s 2025 report on manufacturing. It must also be noted that economic growth has been forecast at around 1.5%, which is higher than initial estimates and a growing cause for optimism moving forward.
From a Made in Britain perspective, it has been another successful year for our members, as they continue to expertly navigate obstacles and drive economic growth for themselves and their businesses, as well as the wider national economy. We now have over 2,200 members, each representing British manufacturing with pride and provenance, creating world-class products and providing high-quality services for the British consumer.
From leading defence firms protecting our nation and supporting our armed forces, to construction companies providing key resources for landmark infrastructure projects, we are beyond proud of each and every one of our Made in Britain members and the growth they have achieved.
In order for this growth to continue, our members and the entire manufacturing sector must continue to champion productivity and innovation, while also embracing the connection of our manufacturing community and celebrating products that are proudly made in Britain. This will not only bolster trade and sales within the United Kingdom, but also enhance the country’s standing on the international export stage.
We anticipate that the future will place a greater emphasis on a business’s ethical responsibility and the impact on its wider communities. One of the reasons why British products are so valued around the world is that products are made well by companies that treat their workers fairly and do their bit for society and the environment.
Earlier this year, we launched our first Environmental & Social Value (ESV) certification for members looking to secure more contracts while also promoting their positive role in employing and training people in the UK, supporting local economies and demonstrating environmental sustainability. This has been very successful in its early stages, and we expect it to only grow even further in 2026.
We will continue our mission to create the best possible outcomes for members, liaising with key stakeholders in parliament and big business, as well as ensuring our members are representing the interests of Made in Britain, and providing solutions to real-world problems for consumers.
It is set to be another big year ahead, full of challenges for our nation’s enterprising manufacturers to overcome, but our relentless resilience has got British manufacturing this far, and we don’t anticipate that coming to a halt any time soon!
In 2026, the gap between manufacturers that invest in technological innovation and those that do not will widen significantly. Technology and ambition are accelerating faster than ever, and companies that refuse to adapt risk falling irreversibly behind.
Hope isn’t a metric that matters, it is confidence will also define 2026 for many businesses. The UK’s Industrial Strategy set an achievable long-term vision for manufacturers, but confidence will depend on visible progress on these promises.
Recent government commitments to reduce electricity costs and simplify access to innovation funding are steps in the right direction, but they must see this start to be translated into clearer action next year.
The future of design and manufacturing will be shaped by AI-driven design intelligence, sustainable manufacturing as a profit centre, and the platformisation of supply chains. Collaboration among small businesses will redefine agility and require supportive policy frameworks. Companies that embrace technology alongside the capabilities of their existing workforce in 2026 will lead the move towards truly connected, digital factories.
For many manufacturers, 2025 proved to be a year of resilience. Rising costs, supply chain volatility and persistent skills shortages continued to challenge even the most established businesses. These pressures underscored a clear reality. Competing in today’s market requires more than efficient processes. It demands a culture that embraces digital thinking, stronger analytical capability and technologies that enable firms to plan, adapt and grow with confidence.
As we enter 2026, the direction of travel is clearer. The UK government’s modern Industrial Strategy has set out a long-term vision for growth, investment and innovation, with a renewed emphasis on backing industry to adopt digital tools. Notably, Yorkshire and the Humber features prominently throughout the strategy, more often than any other English region. This is national recognition of the region’s importance, particularly in sectors highlighted for their potential to drive future prosperity such as advanced manufacturing, clean energy, digital technologies, life sciences, creative industries and defence. They already exist across our industrial base, meaning businesses here are extremely well positioned to benefit from the opportunities ahead.
What is more, the confirmation of a further year of Made Smarter support provides manufacturers with both clarity and momentum. It creates a pathway for firms that have been considering digital adoption to move from intention to action.
Made Smarter gives manufacturers access to specialist advice, digital strategy consultancy, leadership development, workforce training and match-funded technology grants. Our purpose is simple, to help businesses implement technologies that improve productivity, cut waste, strengthen resilience and support the creation of higher-value roles.
Since launching in 2021, Made Smarter Yorkshire and Humber has worked with almost 1,200 manufacturers, produced nearly 700 digital roadmaps and provided technical support to more than 250 businesses. Around 150 firms have engaged in leadership and skills programmes, including 37 who benefited from a digital intern. A further 100 manufacturers have applied for capital grants to invest in technology. These grants, totalling £1.3m, have catalysed an additional £2.4m of private investment, unlocking £3.7m of digital adoption across the region.
The impact of these investments is already visible. Horsforth Brewery, for example, used a digital roadmap to guide its shift from manual canning to automated production. The upgrade removed labour bottlenecks, improved quality and increased output by 150 per cent, giving the business the capacity to expand its presence across Yorkshire.
Visual Systems Healthcare replaced paper-driven processes with integrated digital systems. Automation cut manual data entry by 75% and reduced lead times by 20%, enhancing productivity, customer service and its ability to compete for major NHS and private sector contracts.
These cases demonstrate that digital transformation is not only achievable for smaller manufacturers, it is often transformative. Whether streamlining workflows, improving forecasting or reducing energy use, digital tools help firms make better decisions with less risk.
With national policy aligned behind industry and Made Smarter support continuing here and in other regions, the environment is right for manufacturers to accelerate their digital ambitions. No business needs to take the first step alone. The expertise and funding are ready when they are.
As 2026 begins, the question is no longer whether manufacturers should embrace digital transformation, but how quickly they choose to start. Now is the time to build capability, adopt new tools and shape a stronger future for manufacturing across Yorkshire and the Humber.
The steel industry is hoping for a better 2026 after a difficult 2025. Manufacturing as a whole is in recession, weighed down by weak economic activity, and the steel sector has not been immune.
Our customers’ concerns are our concerns. Automotive production in the UK is down 17% year-over-year according to SMMT, while construction – which accounts for around half of total steel demand – has been a disaster, particularly civil engineering and residential building, reflected in the lowest concrete production levels since the 1950s.
Worse still, the pain of declining steel demand is being felt disproportionately by domestic producers. The relative openness of the UK steel market has allowed the market share of our steel companies to fall to just 30%, an unsustainable figure. By contrast, in the US and the European Union, the domestic market share of its steelmakers is 80% and 75% respectively. Yet fears of deindustrialisation moved US President Donald Trump to implemented stringent tariffs on steel imports, while the European Commission has proposed slashing its steel import quotas in half. The UK government has so far not announced similar measures.
Fundamentally, UK steelmakers are burdened by industrial energy prices that are among the highest in the world, while heavily subsidised Chinese production continues to distort global prices by flooding international markets. Without significant subsidy the trading environment is increasingly difficult for even the most efficient steel companies. In this environment, national steel industries face extinction so long as China is allowed to export its vast overcapacity problem.
Potential bright spots
There is good news on the horizon. Speciality Steel UK (SSUK), the steel assets centred in South Yorkshire that produces high quality steel for use in nuclear, defence and aerospace sectors, will have a new owner or owners in the new year. These assets are viable but were starved of working capital under the previous ownership; we look forward to a significant increase in production next year, filling gaps in the domestic supply chain and easing bottlenecks in key industries.
The rearmament programme is also stimulating demand. Sheffield Forgemasters continues to expand as the Ministry of Defence invests to rearm and safeguard our domestic defence sector. Meanwhile, aerospace is a strong source of demand for UK producers of niche, high quality steel. There is some uptick expected in the construction sector in 2026 with commercial projects being brought forward, while the introduction of new electric car models coming into production should stimulate automotive demand.
However, whether the domestic steelmakers will benefit from any improvement in demand will depend on the government’s trade defence policy. Trade protectionism is an unfortunate but increasingly necessary tool in the steel and broader manufacturing sector due to China. Trade measures would redress the balance back in favour of UK steelmakers, defending jobs and supply chain security. Our customers also need protection. In the US and Canada, tariffs have been applied to imports of ‘steel derivatives,’ products as broad as fasteners, to components for heavy machinery to wind turbines. Manufacturers in the EU are similarly pressing for protection. So far in the UK there is not a similar groundswell of pressure, that is likely to change as it becomes increasingly clear that free trade in manufacturing is not sustainable in this environment.
2025 has been a year of contrasts for UK pharmaceutical manufacturing. While there have been encouraging signs of progress in the UK’s offer to investors, the sector has also faced significant uncertainty – particularly around tariffs and supply chains, amid other complex geopolitical developments.
The UK increasingly faces fierce competition from other markets that view pharmaceutical manufacturing as a source of both economic and national security.
A major push by the US administration to attract greater industry investment has resulted in several significant pharmaceutical manufacturing investments in the US. In stark contrast, the UK has several significant investments paused or cancelled due to a combination of global and domestic factors.
Despite these challenges, there are some positive signs on the horizon for both existing and prospective UK manufacturers, and 2026 looks more promising.
One of the most significant developments was the expansion of the government’s capital grants offer for medicine manufacturing. The £520m scheme, announced in 2024, paired with a new £570m investment programme explicitly designed to attract large-scale projects worth over £250m.
These schemes signal a clearer, more compelling offer to global manufacturers, particularly those considering major facilities for biologics, vaccines, and advanced therapies. They also represent an apparent policy shift towards supporting long-term, strategic, and high-productivity investment, which is critical if the UK is to compete with other nations offering generous incentives.
From an international trade and cooperation perspective, the UK has recognised the importance of exempting pharmaceuticals from US tariffs. The UK-US Economic Prosperity Deal, agreed in May, included a vital commitment to ensure “significantly preferential” treatment of UK medicines exports. In December, the UK and US went further, confirming zero tariffs on all UK pharmaceutical exports to the US for at least three years. Such a deal provides welcome certainty for manufacturers.
Closer to home, 2025 also saw renewed momentum in UK-EU cooperation with a reset Summit that delivered commitments to explore collaboration on health security. Positive engagement with the EU offers real opportunities for regulatory cooperation, supply-chain resilience, and shared scientific leadership. Translating these broad ambitions into tangible commitments will be the ultimate litmus test.
Industry leadership has also been visible through the ongoing delivery of a major industry-funded investment programme focused on overcoming some of the most significant barriers to sustainable medicines manufacturing. Delivered by Innovate UK, The Sustainable Medicines Manufacturing Innovation Programme (SMMIP) has now awarded £68m to innovative projects that range from integrating AI and automation to increase manufacturing productivity and reduce waste, to new green chemistry approaches which aim to reduce harmful emissions.
Energy costs have long been a barrier to manufacturers’ competitiveness. This year the government kicked off plans to reduce energy costs for manufacturers across the Industrial Strategy’s eight priority growth sectors. As highlighted in the ABPI’s Competitiveness Framework, high and volatile energy costs have played a significant role in weakening the UK’s investor offer. New measures aimed at creating a more predictable, affordable energy environment will therefore be key to attracting and retaining global investment in 2026 and beyond.
As 2026 approaches, the sector stands at a moment of genuine opportunity. With increased investment, an improved fiscal environment, progress on energy competitiveness, and renewed international collaboration, the building blocks are in place. The priority now is to sustain this momentum through continued partnership between industry and government, ensuring the UK remains a globally competitive, innovation-driven hub for pharmaceutical manufacturing.
2025 has been a challenging year for food manufacturers, but there is some cause for optimism for the coming year. Previous years have been characterised by external shocks like Brexit, COVID and the Russian invasions of Ukraine. This year the story is about regulatory and policy pressure. The EPR packaging tax, increases in National Insurance alongside the uncertainty created by the budget, have pushed food and drink inflation to five per cent and business confidence to -60%. This will ultimately impact investment. We also worry about the creation of a two-tier economy where sectors picked in the Industrial Strategy get additional support, for example on energy bills, while sectors like ours are excluded.
On the upside, this industry remains full of dynamic and innovative businesses who demonstrate an ambition for growth and resilience. Growing UK sales, finding new customers abroad, developing innovative products and driving digital transformation across the supply chain, remain top priorities for businesses in our sector. We’ve set out a £50bn growth plan for our sector, showing the contribution it can make to the UK economy over the next decade and ease food and drink inflation.
Part of this plan is to increase food and drink exports by £10bn over the next ten years. So, all eyes will be on negotiations with the EU over the new Sanitary and Phytosanitary (SPS) agreement next year. This can help turn the tide on falling food and drink exports to our biggest trading partner. However, it’s important government provides transparent timelines to businesses so they can prepare and adapt in good time.
Further afield, we saw several other new trade deals signed this year, including with the US and India. We expect to see more on the horizon, including with the Gulf Cooperation Council and South Korea. With the right support for businesses of all sizes to make the most of those opportunities, we hope to see the benefits of those deals come to fruition from next year and beyond.
Another key priority of our growth plan will be the easing the regulatory burden on businesses so that they have the ability and confidence to invest. Particularly in drivers of productivity, like tech adoption, automation, skills and innovation.
While the last few years have undoubtedly stretched the resilience of UK food and drink, we remain optimistic about the opportunities for our sector, but a lot will depend on our relationship with government. That’s why we were heartened to hear Emma Reynolds the new DEFRA Secretary of State talk about working in partnership with industry on the growth agenda at our recent Investment Summit. Her announcement of a new Food Inflation Gateway was also welcome. If we can create a strong partnership between government and industry, one which promotes growth, investment and trade, while removing barriers to investment, then this could be a game changer. 2026 could be the year when we unlock the potential of the UK’s largest manufacturing sector.
The UK’s surface-finishing sector entered 2025 under increasing pressure. New analysis from BEP Surface Technologies shows one in six electroplating firms has disappeared in a decade, with inflation-adjusted growth stagnating and several remaining operators already insolvent. It confirms not just a long-predicted contraction, but a growing strategic risk to supply chains in defence, aerospace, nuclear and rotating equipment.
Against this backdrop, BEP committed to a year of decisive modernisation.
Early in 2025, the company completed a £500,000 refurbishment of its electroplating pit, its largest infrastructure overhaul in three decades. The project required removing tanks of up to 15,000 litres, handling more than 31,500 litres of chemical solutions, relining the concrete pit with high-performance epoxy and installing redesigned titanium-lined tanks. The upgrade strengthens safety, reduces downtime and provides a long-term operating platform for decades ahead. Importantly, it was led by BEP’s younger technical team, demonstrating how continuity now depends on practical knowledge transfer as the sector faces a shrinking skills base.
Alongside major infrastructure work, BEP focused on eliminating bottlenecks in process control. The company brought ion chromatography in-house for the first time, installing a Dionex Inuvion system in its Manchester R&D lab. This has already reduced lead times on specialist applications by 10% and improved bath chemistry management, enhancing plating consistency for high-specification customers.
A turning point came when a consortium of 23 companies, including BEP and led by the Surface Engineering Association (SEA) secured a 12-year UK REACH authorisation for Chromium Trioxide and Chrome 6. The decision avoids a regulatory cliff-edge, prevents critical processes from being forced offshore and gives UK firms the long-term certainty required to invest with confidence. For BEP, it created the environment needed to accelerate its most ambitious programme.
That programme is the £600,000 transformation of Machine 22, a 1950s Churchill grinder undergoing a complete mechanical and digital rebuild with Siemens and Made Smarter. Once complete, the machine will achieve 0.001mm tolerances on rollers up to 20 tonnes, reshoring work that UK manufacturers have increasingly had to send to Europe due to capability gaps. It is a clear example of heritage engineering elevated to meet modern industrial demands.
BEP enters 2026 focused on bringing this capability into full production, scaling digital quality systems, advancing R&D in electroless nickel and corrosion-resistant coatings, and advocating for coordinated national action on training and capability mapping.
The message is clear: UK surface engineering is approaching a tipping point. Whether the capability remains onshore will depend on businesses making—and maintaining — the kind of long-term, strategic investments that 2025 required.
2026 will reward manufacturers who connect the dots: modernise OT and data foundations, deploy agentic AI with strong governance frameworks, electrify strategically, and measure progress with capital and carbon efficiency in mind. Next year will be about freeing trapped value from legacy manufacturing constraints, compressing time-to-market, and reducing the cost of competitiveness.
CFOs will retire OEE to tackle multi-million legacy manufacturing costs
In 2026, profitability and efficiency will dominate manufacturing agendas and CFOs will work smarter on reducing operational expenses, imperative to maximising long-term growth and investment. A recent Omdia study uncovered that mid-sized manufacturers lose an average of $11m (£8.2m) every year (or 7.5% of revenue) to a ‘lock-in penalty’: inefficiencies, downtime, and compliance retrofits linked to closed, vendor-locked-in industrial ecosystems.
These costs are hard to spot, measure or manage unless we retire OEE (Overall Equipment Effectiveness). OEE can be misleading, as it only measures actual vs. planned utilisation. A 100% OEE for a production line that only runs once a week on a Monday doesn’t not mean you are running a capital efficient plant. Far from it. To make our industry more resilient and competitive, it’s time to introduce a Capital and Carbon Efficiency (CEE) metric that bridges operational, financial and sustainability goals.
Next year, CFOs will start to successfully tackle the productivity challenge by measuring what truly matters and pushing for more capital- and carbon-efficient industrial systems.
Agentic AI will redefine industrial intelligence, as human-in-the-loop push intensifies
In 2026, agentic AI will become a cornerstone of industrial innovation, transforming operations in both Life Sciences and Food & Beverage manufacturing. These systems, trained on sector-specific data, will proactively recommend actions such as cleaning-cycle optimisation to plant operators. They will test and correct code, helping engineers improve control, safety and batch logic during design and maintenance. Agentic AI will drive predictive maintenance, reducing downtime and improving efficiency. It has already started optimising production environments by regulating temperature and humidity, to name just a few, to support facility managers and ensure consistent product quality.
In F&B, solutions like ‘Golden Clean-in-Place’ can optimise cleaning cycles, reduce waste, cut chemical and water use – shortening cleaning cycles in the process. In Life Sciences, AI will continue accelerating drug development, while human oversight will remain essential to managing risk, bias, and explainability. As governance frameworks around ‘black box’ AI mature, with the EU AI Act coming into force on 2 August 2026, the push for transparent agentic AI will intensify to ensure AI remains a strategic enabler of resilience and growth.
Proprietary industrial data will take centre stage
In 2026, F&B manufacturers will harness real-time production data at the edge to deliver value, reduce waste, and optimise supply chains amid inflation and shifting consumer behaviour. Data control and access permissions can be designed to allow suppliers to analyse and provide inputs, delivering valued insights and action recommendations.
In Life Sciences, data integrity and traceability will become even more critical, as AI adoption moves from drug discovery to manufacturing. AI-driven digital twins and predictive modelling will be highly relevant for streamlining tech transfer from a manual, intensive process into a precision-driven workflow. The objective: compress time-to-market to maximise patent exclusivity windows for production, while preserving data integrity. With 95% of Life Sciences projects overrunning their target cost and schedule, and a six-month delay potentially eroding more than $750m in net present value (NPV), the opportunity presented by technology has never been more tangible. As a result, demand for vendor-neutral industrial platforms and software that accelerate technical data transfers from R&D to full-scale manufacturing will intensify.
Players will deploy intelligent industrial electrification strategies to protect margins
In 2026, intelligent process electrification and energy technologies will become a strategic priority for manufacturers seeking to cut emissions and control energy costs. With growing adoption of on-site renewable power generation and microgrids managed by intelligent systems, industrial players will be able to schedule production based on expected consumer demand patterns as well as forecasted energy price, availability or carbon mix. As energy volatility persists, companies will adopt phased and strategically planned electrification roadmaps. Those that allow them to ramp up production when low-carbon electricity is abundant, pause or export surplus energy when energy prices spike, turning energy agility into industrial resilience and margin protection.
Industrial hardware refresh cycles will accelerate to meet IIoT and AI demands
In 2026, we may enter a new investment cycle for industrial hardware replacement targeting business outcomes and the spotlighting the desire to modernise OT for embedded cybersecurity, sustainable efficiency, and readiness for autonomous operations. According to IDC’s 2024 Worldwide IT/OT Convergence Survey the average OT asset has been in service for 11 years, with 50% older than 11 years and 18% older than 16 years. These are likely to be replaced soon as they do not have key features of today’s modern hardware: embedded security and AI integration. Therefore, I believe next year, we’ll see industrial players prioritise modular, interoperable IIoT (Industrial Internet of Things) and production systems, as well as secure-by-design controllers. Upgrades will be most effective where legacy assets currently block real-time data, cybersecurity compliance, or closed-loop optimisation.
To conclude, 2026 will mark a turning point for industrial players who move beyond incremental fixes and embrace system-level change, measured through a Capital and Carbon Efficiency lens. Those who act now will not only protect margins but also secure a competitive edge in an increasingly volatile and complex global market.
This year has highlighted a clear reality: companies embracing digital transformation are pulling ahead, while those relying on legacy systems risk being left behind. Organisations with fragmented data platforms and limited automation have struggled to respond to market changes and operational disruptions.
Looking ahead to 2026, we expect AI’s role to expand beyond ‘experimental’ to ‘industrialised,’ with agentic capabilities becoming increasingly central to how organizations deploy and derive value from AI systems. Traditional AI has provided numerous benefits, but it still requires manufacturers to interpret alerts and execute decisions. Agentic AI however will close the loop by enabling the autonomous detection of issues and execution of solutions, with the human in the loop only to monitor or manage exceptions. This shift will allow teams to focus on higher-value work such as strategy, innovation, and continuous improvement.
Human intelligence will remain central to success, but leaders must be brave enough to reimagine how their employees work with technology. Skilled teams bring qualities machines cannot replicate such as creativity, problem-solving, and adaptability. Yet as things stand many employees are stuck doing mundane work that would be better handled by AI agents. 91% of UK industry workers reported spending large amounts of their day carrying out low-value work. Our research from earlier this year, revealed that leaders already understand this, with 82% of manufacturing organisations agreeing that effectively adopting advanced AI technologies will be critical to future success. To realise this intention, leaders must also prepare their organisation for that shift. This means overcoming the reluctance to cede decision-making authority to AI in a traditional industry.
On a practical level, taking advantage of agentic AI, which is one form of AI that can act autonomously, requires manufacturers to have fully integrated digital platforms capable of maximizing the value of data. This enables a transition from general AI applications doing generic automation tasks such as invoice matching, to more industry-specific AI solutions that address manufacturing’s distinct challenges, such as predicting equipment failure and issuing orders and appropriate parts lists to improve first-time-fix rates,
For the companies that get this right, the ability to make proactive, data-driven decisions will be game changing. By combining agentic AI, human intelligence, and integrated digital systems manufacturers can turn challenges into competitive advantage. This is why we believe 2026 presents a year of real opportunity for the UK manufacturing industry.
2025 provided our sector with clarity and direction through the government’s modern industrial strategy, while cementing the High Value Manufacturing Catapult’s position as a cornerstone of the UK’s industrial transformation.
Six months on from the strategy’s publication, momentum is clearly building, with increased public and private investment into priority sectors within advanced manufacturing, such as clean energy, defence, manufacturing processes and life sciences.
The role of HVM Catapult as a key delivery partner also came into sharp focus following the launch of a new alliance with the Ministry of Defence to strengthen the UK’s defence manufacturing supply chain and the appointment of our Chief Technology Officer, Chris Dungey, as the UK’s new AI champion for advanced manufacturing.
In 2026, our fifteenth anniversary year, the industrial strategy will begin delivering tangible benefits for UK manufacturing – strengthened supply chains, expanded capability and increased commercialisation of deep-tech innovations. Practical, real-world AI adoption in SMEs will become commonplace not cutting edge, as our AI champion convenes existing expertise to help manufacturers harness AI and boost productivity, competitiveness and sustainable growth across the UK.
