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.

Barclays’ anonymised client data from around 30,000 UK manufacturing businesses, comparing Q2 2026 to Q2 2025, shows a growing divergence between larger manufacturers and SMEs.

• Among larger manufacturers served by Barclays UK Corporate Bank, cash inflows fell 3.5 per cent year-on-year, while loan balances increased by 12.8 per cent. This suggests businesses are continuing to invest despite softer trading conditions

  
  

• In contrast, SME manufacturers served by Barclays Business Banking, recorded a 1.4 per cent increase in cash inflows. However, average loan balances fell by 17.7 per cent, despite the number of loans increasing by 1.1 per cent, while savings balances also rose by 1.1 per cent, suggesting smaller firms are prioritising financial flexibility

Manufacturers remain confident and plan further ahead in response to uncertainty

The vast majority of manufacturers surveyed (94 per cent) expect their business to prosper over the next 12 months, even as almost nine in 10 (89 per cent) 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 per cent) 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 per cent over the next 12 months, while two thirds (66 per cent) 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 per cent 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 per cent) and better forecasting and decision-making through data insights (23 per cent), to stronger supply chain resilience (22 per cent).

The next phase of investment is increasingly focused on AI and resilience. Over the next three to five years, more than a quarter (27 per cent) plan to invest in agentic AI or AI-driven planning, forecasting and decision-making systems, alongside cybersecurity and operational resilience technologies (25 per cent) and logistics automation (22 per cent).

Businesses are also strengthening operational resilience through storage transition. More than one in 10 (13 per cent) have increased on-site storage or are holding additional buffer stock, while 10 per cent are actively expanding storage capacity.

Growth in production volumes is the most frequently cited driver of additional storage needs (22 per cent), followed by geopolitical supply-chain uncertainty and increased customer stockpiling (both 19 per cent).

Tom Horton, Head of Manufacturing at Barclays UK Corporate Bank, said:

“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."

“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 per cent) view working with the defence sector more positively than 12 months ago. As governments and businesses respond to a more uncertain global environment, 72 per cent 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 per cent) 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 per cent of firms saying they have made changes to support defence, national security and critical infrastructure. This includes planned investment in physical security upgrades (66 per cent), security clearances and specialist recruitment (63 per cent).

Sarah Collins, Head of SME Industries at Barclays Business Banking said:

“Manufacturers are showing a remarkable ability to adapt, whether that's embracing new technologies, strengthening their operations or exploring opportunities in emerging markets."

“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.