LONDON, March 3 (Xinhua) -- The UK manufacturing sector is regaining momentum, but whether that recovery can translate into sustained growth will depend on how effectively structural constraints are addressed, an expert told Xinhua in a recent interview.
Sara Maioli, an applied economist at Newcastle University specializing in international economics and firm-level data, said that the sector is "resilient but not yet on a strong growth path."
Her assessment came as data from S&P Global showed the UK Manufacturing Purchasing Managers' Index (PMI) stood at 51.7 in February, marking the fourth consecutive month of expansion. Output rose at a 17-month high and export orders increased at the fastest pace in four and a half years.
Maioli described these improvements as "timid positive signs." In January, Make UK reported export sales rising for the first time in four years. However, its latest executive survey pointed to only mild confidence, with firms facing rapidly rising employment and energy costs.
"Many manufacturers warn that these pressures are approaching a tipping point, beyond which investment decisions may be delayed, cancelled or moved overseas," she said.
According to Maioli, recent capital-focused policies could raise the sector's growth potential. The permanent full expensing regime, introduced in 2023 and retained by the current government, allows firms to deduct the full cost of qualifying plant and machinery investments from taxable profits.
She said this encourages multi-year upgrade cycles in automation, robotics and digital systems, raising capital stock per worker and improving competitiveness in higher-value export segments.
Government efforts, including strengthening Investment Zones and Freeports, establishing AI Growth Zones and launching a 600-million-pound (798-million-U.S. dollar) Strategic Sites Accelerator in 2026, are also designed to attract foreign direct investment and reinforce advanced manufacturing clusters, according to Maioli.
"These measures lift the ceiling," Maioli said, referring to the sector's potential growth capacity over the coming decade.
However, she cautioned that structural headwinds could determine where actual growth settles within that ceiling.
Industrial electricity prices in the UK remain considerably higher than in the United States and China, and above those in major EU economies. While firms may accelerate automation to improve productivity, high energy intensity continues to weigh on unit costs and price competitiveness.
Workforce shortages present a second constraint. Apprenticeship starts in manufacturing and engineering have fallen by around 40 percent since the introduction of the Apprenticeship Levy in 2017. Although the government has committed to launching an Upskilling and Reskilling Program for advanced manufacturing under its Modern Industrial Strategy, Maioli said effective and timely delivery will be critical.
"If skills shortages continue to constrain productivity and competitiveness, manufacturing growth through the later 2020s is likely to remain roughly flat to low single digits, with variation across subsectors," she said.
Regulatory developments add a further layer of complexity. From 2026, the European Union's Carbon Border Adjustment Mechanism (CBAM) will require UK exporters in carbon-intensive sectors to provide verified emissions data or face default carbon values. The UK's own CBAM will take effect in 2027 as a domestic environmental tax.
At the same time, stricter rules of origin for electric vehicle batteries are scheduled to apply from 2027 unless extended. Without sufficient UK or EU cell production capacity, UK-built electric vehicles could face tariffs of 10 percent or more when exported to the EU.
Taken together, Maioli said the UK manufacturing sector now faces a clearer range of outcomes than in recent years. Policy coherence, capital incentives and new trade access have raised its potential growth ceiling. Yet if energy costs, skills shortages and compliance burdens are not managed effectively, margins could be compressed and export competitiveness weakened.
In her view, the decisive factor in the coming years will not be short-term demand fluctuations, but whether productivity upgrades, supply-chain investment and regulatory readiness keep pace with tightening global standards. ■
