2025 was characterized by geopolitical uncertainty, sluggish growth and government dithering which all led to very low levels of business confidence. Can we look forward to better in 2026? Well, the signs of the first few days of the year are that the geopolitical uncertainty isn’t going to end anytime soon. The unilateral (to put it politely) actions of the Trump administration have sent governments around the world, if not into panic, then at least into ‘check all your options’ mode. The dramatic trade measures of last year (some of which were walked back after market pressure) seem likely to be followed this by further foreign policy turbulence.
Moves by the UK Government to ‘deepen the reset’ with the EU were always likely – it seems to be the only growth lever available – but events on the other side of the Atlantic have added a security based impetus to what, is still, a primarily economically driven development.
The first moves in that process, building on last year’s rapprochement with the EU, are likely to be finalising and perhaps expanding the SPS agreement which is so important to food producers and suppliers. Cooperation on energy is next on the list, with the Government keen to do anything that might bring prices down. In that space, the announcement of a British Industrial Competitiveness Scheme (BICS) to subsidise some industrial users before Christmas was welcome but its size and scope, as currently mooted, are too narrow to move the dial for most manufacturers. EAMA will be urgently making those points in the consultation in the early weeks of January.
As well as BICS there were a number of other policy changes late in the year. There was a partial U-turn on inheritance tax reform which may help some family firms as well as farmers and the flagship Employment Rights Bill was amended to remove the section implementing full employment rights from Day One, before being finally passed three days before Christmas. Employment Rights will remain on business representatives’ agenda with the debate now moving from the floor of the Commons and Lords to Committees which will draft the secondary legislation.
2026 should also be the year in which we begin to see if the Industrial Strategy published last summer is going to have the stickabilty that it needs if businesses are going to be able to take it seriously and factor it into their investment decisions. The BICS policy has been framed around the Industrial Strategy’s central concept of key sectors, something that in theory should act to the advantage of EAMA members, but the proposed implementation – at the moment – lacks the sort of sectoral understanding necessary to deliver. Another area to watch will be skills, as we should see quite soon what sort of training will be available for funding under the new Growth and Skills Levy, which will replace the Apprenticeship Levy in April.
As always, each sector, market and company is subject to different factors but manufacturing as a whole tends to benefit from the stability that encourages companies to invest: in technology and skills. After the whiplash inducing ups and downs of the post-Covid period, manufacturing activity actually remained quite stable in 2025, with modest growth towards the end of the year. If that can be sustained into 2026 then we could start to see investment sentiment becoming more positive.