UK factories hit by ‘collapse’ in orders and soaring costs
Manufacturers have been forced to raise their prices at the fastest pace since 2023, the industry body Make UK warns
Patrick Hosking, Financial Editor
Monday March 16 2026, 12.01am GMT, The Times
Britain’s factories have suffered a “collapse” in domestic demand and rising costs, according to a grim warning from the sector that comes as hopes of an interest rate cut this week have been dashed by war in the Gulf.
Manufacturers said that British orders had dropped sharply in the first quarter of the year and firms had been forced to raise prices at the fastest pace since 2023, in the latest snapshot of the sector from Make UK.
Recruitment was lagging behind expectations while confidence had fallen for the third successive quarter. “UK manufacturing has begun 2026 on a fragile footing,” it said.
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The sober assessment comes after GDP data revealed on Friday that growth in the overall UK economy ground to a halt in January, even before hostilities in the Gulf sent a fresh tremor through Britain’s boardrooms.
The Bank of England is expected to keep base rate unchanged at 3.75 per cent on Thursday because of concerns about how rising crude oil and gas prices could push inflation well above its 2 per cent target.
The price of Brent crude, the international benchmark, reached $118 a barrel last week. It has retreated since then but is still far above the $60 to $70 range prevailing before the war began. A barrel of Brent crude was priced at $103.14 when official trading ended on Friday. Over the weekend in informal trading on the IG spread-betting platform, the implied price oscillated in the $100 to $103 range.
The price has seesawed dramatically in the past two weeks according to the intensity of the fighting and the changing view of how soon tankers could start to sail again through the Strait of Hormuz.
Japan will start releasing oil from its stockpiles today after petrol prices started rising, one of many countries trying to soften the shock. Tokyo pledged to release 80 million barrels of oil, about 45 days of supply for the energy-poor nation.
In its Manufacturing Outlook report, Make UK said that production edged up in the first quarter of 2026 after a post-budget slump at the end of last year, but the recovery remained fragile.
Fhaheen Khan, senior economist, said: “While output and investment show some improvement after a challenging end to last year, rising costs and weakening domestic demand are creating real pressures for businesses.” The outlook was “precarious”, he added.
Manufacturing accounts for 9 per cent of GDP but punches above its weight in economic importance as a provider of 34 per cent of UK exports and 47 per cent of research and development spending.
In evidence that inflationary pressures were already building, the report found that a net balance of 31 per cent of respondents were increasing prices, the highest since the spring of 2023.
New labour market figures are due on Thursday, which will give clues as to how quickly wage pressures may be easing on the back of higher unemployment.
Investors will also be watching the government bond market this week after Rachel Reeves said she was considering “different options” to help those most adversely affected by rising energy bills. The benchmark ten-year gilt yield at 4.82 per cent has risen by 0.41 of a percentage point in the last month, pointing to a substantial increase in the cost of future government borrowing.BusinessEconomicsShareSave
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