Employment falls despite manufacturing output hitting new high
Employment across the manufacturing sector dropped despite output jumping to its highest level in 17 months, new data has shown.
Manufacturers continued shedding staff due to high pay and tax pressures, according to S&P Global’s latest purchasing managers index (PMI).
The poor reading for the labour market came in direct conflict with more positive results across the sector at the start of this year.
Respondents to the monthly survey recorded the highest level of manufacturing output in 17 months as the PMI reached 51.8, above the benchmark reading for no change in production.
The latest score also adds to a three-month consecutive streak of growth across the sector, with a string of new orders and shorter delivery times helping to give company chiefs a much-needed lifeline after months of struggles.
A drop in employment levels combined with a boost in output could translate into a more positive trend for productivity across manufacturing.
While analysts said the decline in jobs over January was the weakest level recorded in more than a year, they warned costs were “creeping higher” though a rise in the national minimum wage and higher commodity prices.
“UK manufacturing made a solid start to 2026, showing encouraging resilience in the face of rising geopolitical tensions,” Rob Dobson, director at S&P Global, said.
“The strongest rise in new business for almost four years was insufficient to fully quell reductions to staff headcounts.”
Manufacturing’s reliance on trade ties
In some concerning news, S&P Global researchers suggested that the increase in production volumes over January was driven by larger manufacturers as small businesses suffered from a fall in output.
Higher levels of exports to both the US and China may be seen positively by Labour government officials who have boosted trade central to their growth mission.
Officials have faced questions about building closer ties with both the Trump administration and Xi’s regime over the threats of security.
Last week, Keir Starmer was joined by dozens of business delegates from FTSE-listed giants including Astrazeneca on his trip to China.
Now his focus is set to turn to the EU as he emphasised trade negotiations with the economic bloc, which is the UK’s largest trading partner, would be “iterative” in each year.
Defence manufacturers in the UK may hope that Starmer negotiates terms of access to the Security Action for Europe (Safe) fund, which provides loans to member states for procurement.
Mike Thornton, the head of industrials at the consultancy RSM, said the development of trade ties through a government-led programme could “unlock real growth”.
“Leveraging the production strength we hold in the UK to maximise commercial opportunities will be key.”