New WorkJam research reveals manufacturers navigate cost pressures and workforce challenges while AI maturity remains limited

More than half (52%) of organisations have reduced or slowed hiring over the past six months, yet employee engagement (16%) and retention (15%) remain among the sector's biggest workforce challenges.

The findings, based on a survey of 142 manufacturing professionals conducted at Smart Manufacturing Week 2026, show that reducing costs has become the sector’s biggest challenge, according to 19% of respondents. The impact is already being felt across the industry, with nearly a quarter (24%) of respondents saying rising labour costs and productivity pressures are causing them to slow recruitment in skilled production and engineering roles, while 23% said they are increasing prices to offset higher costs.

Manufacturers are also adapting to the changing regulatory environment. Almost 40% of respondents said the Employment Rights Bill and wider labour regulations have already forced them to change how they manage their workforce. More broadly, more than two-thirds (67%) said current pressures are leading them to rethink how they manage and organise operations, while half said cost control is now taking priority over employee experience and workforce enablement.

AI adoption is growing, but operational maturity lags behind

While AI adoption is widespread, most manufacturers remain in the early stages of implementation maturity. Specifically, more than three-quarters (76%) said their organisation is using AI to support workforce or production operations, but only 11% reported deployment at scale. The research also found that just 7% are investing in AI primarily to improve the shopfloor experience, with most organisations focusing instead on efficiency and productivity objectives.

"Manufacturers are currently facing difficult business decisions, but as the findings suggest, many also recognise that reducing costs cannot come at the expense of workforce capability," said Mark Williams, MD EMEA at WorkJam. "Engagement and retention remain high on the agenda because experienced frontline and production employees play a critical role in maintaining productivity and operational performance. Manufacturers now need to invest in technology, such as AI-powered frontline employee engagement platforms, to improve efficiency and simplify operations while continuing to provide managers and frontline teams with the support they need to do their jobs effectively."

www.workjam.com