UK MANUFACTURERS remain confident about their future prospects, despite rising energy costs and ongoing geopolitical uncertainty. Barclays Business Prosperity Index research among manufacturing leaders shows businesses are responding by investing in automation, taking a longer-term approach to planning and pursuing opportunities across defence, national security and critical infrastructure.
The vast majority of manufacturers surveyed (94%) expect their business to prosper over the next 12 months, even as almost nine in 10 (89%) say energy costs are constraining growth or investment to some extent.
This confidence is supporting a longer-term approach to decision-making, with over three quarters (76%) planning major investment, sourcing and supply-chain decisions further ahead than they were a year ago.
The research shows that manufacturers expect to increase spending by an average of 32% over the next 12 months, while two thirds (66) have borrowed to fund investment over the past year.
Automation and storage transition drives resilience and investment
Automation of robotics is becoming a key resilience tool for UK manufacturers, with 87% saying it is helping them manage disruption and demand volatility across their operations.
Manufacturers also report benefits ranging from improved order fulfilment and delivery performance (23%) and better forecasting and decision-making through data insights (23%), to stronger supply chain resilience (22%).
The next phase of investment is increasingly focused on AI and resilience. Over the next three to five years, more than a quarter (27%) plan to invest in agentic AI or AI-driven planning, forecasting and decision-making systems, alongside cybersecurity and operational resilience technologies (25%) and logistics automation (22%).
Businesses are also strengthening operational resilience through storage transition. More than one in 10 (13%) have increased on-site storage or are holding additional buffer stock, while 10% are actively expanding storage capacity. Growth in production volumes is the most frequently cited driver of additional storage needs (22%), followed by geopolitical supply-chain uncertainty and increased customer stockpiling (both 19%).
"Despite continued pressure from energy costs and a more uncertain global environment, businesses are responding by looking further ahead, investing with greater certainty and building more resilient operating models," said Tom Horton, head of manufacturing at Barclays UK Corporate Bank. "The opportunities ahead are significant. From advanced manufacturing and AI-enabled operations to defence supply chains and national infrastructure projects, businesses are positioning themselves to capitalise on long-term growth markets. Those able to invest, innovate and scale will be well placed to benefit from the next phase of the sector’s development."
Defence and critical infrastructure opportunities gather pace
As manufacturers continue to invest for growth, opportunities in defence, security and critical infrastructure markets are becoming increasingly important across the sector.
More than three quarters of manufacturers surveyed (77%) view working with the defence sector more positively than 12 months ago. As governments and businesses respond to a more uncertain global environment, 72% of manufacturers have reported increased demand from defence and security customers.
Looking ahead, manufacturers are taking a longer-term view of emerging growth opportunities. More than a quarter (27%) plan to develop or sell defence-related products over the next three to five years, with the same proportion targeting dual-use products with both civilian and military applications.
This shift is already influencing investment decisions, with 81% of firms saying they have made changes to support defence, national security and critical infrastructure. This includes planned investment in physical security upgrades (66%), security clearances and specialist recruitment (63%).
"Manufacturers are showing a remarkable ability to adapt, whether that's embracing new technologies, strengthening their operations or exploring opportunities in emerging markets," stated Sarah Collins, head of SME industries at Barclays Business Banking. "For smaller businesses in particular, balancing investment with day-to-day resilience remains a priority. Through the Barclays Business Prosperity Fund and our wider support offering, we're helping manufacturers access the finance, insights and networks they need to grow, improve productivity and unlock new opportunities."
To support businesses to invest for growth, the £22bn Barclays Business Prosperity Fund is available to provide lending and refinancing to eligible Business Banking and UK Corporate Banking clients across the UK.
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