uk manufacturers — UK manufacturers are experiencing their lowest levels of investment in new equipment relative to sales since 2017, according to a recent report from trade body Make UK. This alarming trend highlights the urgent need for government action in the upcoming budget.
Manufacturers are currently investing only 6.8 per cent of their annual turnover in plant and machinery, a significant drop from 8.1 per cent in 2024. This figure marks the lowest proportion recorded in any survey over the past eight years. Additionally, investment in research and development has decreased to 6.2 per cent of turnover, down from 6.5 per cent, indicating a shift in priorities towards staff costs and training.
Fhaheen Khan, a senior economist at Make UK, expressed concern over the current investment landscape. “It’s clear that we’re at a critical juncture for investment, and there is a real sense of urgency. The forthcoming Budget must not only safeguard current incentives but refine them,” Khan stated.
In June, the British government released its first industrial strategy in eight years, which has begun to influence manufacturers’ priorities. This strategy encourages a greater focus on decarbonisation, with around a third of manufacturers considering increased investment in this area. Tax incentives play a crucial role in shaping these investment decisions, with nearly 40 per cent of the 170 businesses surveyed by Make UK indicating that they are heavily influenced by these financial benefits.
Investment levels in Britain remain below the average for advanced economies, contributing to weak productivity growth and lower output per hour compared to the United States and most of northern Europe. British finance minister Rachel Reeves announced a substantial increase in public investment in infrastructure and energy last year, which was financed through increased borrowing and taxes on employers.
Looking ahead to her next budget on November 26, Reeves may need to implement further tax increases and savings measures. Make UK has urged her to maintain existing incentives for business investment and simplify the process for smaller firms to claim tax breaks, particularly for software, patent revenues, and bespoke equipment used for product testing.
Mike Thornton, head of manufacturing at accountants RSM UK, who contributed to the report, emphasised the importance of simplifying tax reliefs. “We know tax reliefs influence investment decisions, so the chancellor has a real opportunity to make them more accessible,” Thornton noted.
