Taking the pulse of UK manufacturing: costs, AI and sustainability
Abstract
UK manufacturers continue to operate in a challenging environment shaped by cost pressures, workforce constraints and supply chain uncertainty. At the same time, many businesses are adapting through digital transformation, energy efficiency and more sustainable production methods. This article explores how UK manufacturing is responding and where opportunities are emerging.
Taking the pulse of UK manufacturing: costs, AI and sustainability
UK manufacturing remains under pressure from a complex mix of economic, operational and regulatory factors. Yet across the sector, businesses are finding practical ways to adapt, improve resilience and plan for the future.
At NFU Mutual New Forest, Isle of Wight and Bournemouth, we support a wide range of manufacturing clients across our region. Here’s our perspective on some of the key themes shaping the sector today.
Operating under pressure: the current manufacturing landscape
Rising employment taxes, energy costs and raw material prices continue to influence decision-making across UK manufacturing. According to BDO and Make UK’s report, manufacturing output fell in the first quarter of 2025 for the first time in a decade[1], leading some businesses to pause recruitment or delay investment plans.
Energy costs remain a significant factor, with UK manufacturers facing electricity prices well above those in the US and the global average[2]. While the Government’s Industrial Strategy commitment to reduce electricity costs for energy-intensive firms from 2027 has been welcomed, many businesses are still focused on managing near-term pressures.
Against this backdrop, manufacturers are prioritising efficiency by reviewing processes, investing in modern equipment and reassessing how and when energy-intensive activities take place. These pressures are shaping behaviour, but they are also accelerating change.
AI: from buzzword to business tool
Artificial intelligence (AI) is now firmly part of ‘Industry 5.0’ — the next phase of manufacturing modernisation. It is no longer a future concept. Over half of UK manufacturers already use AI or machine learning on the factory floor, and almost all plan to adopt generative AI3.
In practice, AI is being applied in a range of areas, including quality control, predictive maintenance, cybersecurity, training and compliance reporting. For many manufacturers, it offers a way to improve consistency, reduce errors and ease skills shortages by automating routine tasks.
The challenge lies in integration. Businesses must ensure new technologies work alongside existing systems and that employees have the skills and confidence to use them effectively.
Sustainability: balancing environmental and commercial priorities
Sustainable manufacturing is increasingly driven by customer expectations, regulatory requirements and supply chain scrutiny. The focus is on reducing environmental impact while maintaining productivity and profitability.
Manufacturers are adopting a range of technologies to support this balance, including:
- 3D printing to enable on-demand production and reduce waste
- AI to optimise production processes and supply chains
- Blockchain technology to improve transparency and traceability
However, operating more sustainably brings its own challenges. Many firms need to invest in new skills, reskill existing teams and integrate advanced systems, all while keeping pace with evolving regulations.
Supply chains: building resilience
Supply chains have been under sustained pressure since 2020, shaped by Brexit, geopolitical instability and global trade disruption. While conditions have stabilised in some areas, uncertainty remains.
To adapt, manufacturers are diversifying suppliers, investing in automation and reviewing sourcing strategies. Although reshoring has gained attention, it is often complex and costly. A 2024 survey by NexSys suggested that reports of reshoring may be overstated, with only 10.7% of manufacturers saying they were bringing production back to the UK4.
For many businesses, resilience is less about reversing globalisation and more about flexibility, visibility and contingency planning.
Looking ahead
Despite ongoing challenges, UK manufacturing continues to evolve. Energy efficiency, digital transformation and sustainable practices are becoming core elements of long-term strategy rather than short-term responses.
Manufacturers that invest in adaptability and innovation are likely to be better placed to manage uncertainty and take advantage of emerging opportunities.
Supporting you and your business
At NFU Mutual New Forest, Isle of Wight and Bournemouth, we support manufacturing businesses of all sizes helping to protect assets, manage risks and plan for growth.
Our friendly, experienced team lives and works in the communities we serve. We pride ourselves on building long-term relationships founded on trust, understanding and specialist local knowledge.
With offices in Brockenhurst (New Forest), Newport (Isle of Wight) and Westbourne (Bournemouth), you’re always welcome to pop in for a chat. Our dedicated teams are here to help whenever you need us.
With a genuine commitment to our customers and an in-house claims team who’ll deal with you directly, we’re here to help protect what matters most.
Because with us, protecting your business is personal.
New Forest: 01590 607134 | New Park, Brockenhurst, SO42 7QH
Isle of Wight: 01983 897804 | 2 Langley Court, Pyle Street, Newport, PO30 1LA
Bournemouth: 01202 070317 | 16 Landseer Road, Westbourne, BH4 9EH
To find out more contact our agency
[1] MAKE UK and BDO Manufacturing Outlook Report, March 25
[2] MAKE UK, Tackling Electricity Prices, June 25