Autumn Budget 2025: Manufacturing Sector Predictions & Wish List

Making full expensing permanent was a significant first step but does not cover all assets with lower rates of full expensing relief apply to certain assets including lighting and electrical system and a 3% relief rate applying to structural works.

Manufacturing is capital-intensive, and investment cycles are long, so allowing enhanced write offs and payable tax credits where losses are created through capital investment would give businesses confidence to modernise plant and machinery. This would help raise productivity, improves competitiveness against overseas rivals, and accelerates the adoption of advanced and greener manufacturing methods.

UK manufacturers face higher electricity and gas prices than many international competitors. Extending or enhancing energy-intensive industry support – through discounts on network charges, exemptions from certain levies, or better access to affordable long-term energy contracts – would directly reduce one of their largest cost burdens. This is particularly important for sectors like steel, ceramics, and chemicals, where energy costs can make up a large share of production expenses.

3. Support Skills and Workforce Development (and Reduce Labour Costs)

Manufacturers consistently cite shortages of skilled labour as a constraint on growth. Additional funding for apprenticeships, technical colleges, and in-work training – ideally with more flexible rules on how businesses can use the apprenticeship levy – would help firms build the workforce they need.

Alongside this, the government could ease immediate cost pressures by reversing recent increases in employer National Insurance Contributions (NICs). Lower NICs reduce the cost of hiring and retaining staff, giving manufacturers more headroom to invest in training and job creation. Together, these measures would strengthen both the affordability and the quality of the manufacturing workforce.

Artificial intelligence has the potential to transform UK manufacturing by improving efficiency, enabling predictive maintenance, reducing downtime, and supporting product innovation. Budget measures could include enhanced R&D tax credits for AI applications, targeted grants for SMEs adopting digital manufacturing tools, and dedicated funding for AI training programmes. Supporting AI adoption would help smaller firms catch up with larger players and create a broad uplift in productivity across the sector.

The cyberattacks on Jaguar Land Rover have shown the impact of cyber threats to the manufacturing ecosystem. Cyber attacks seek weaknesses in the internal security or in the supply chain and in such an interconnected sector as manufacturing it is critical that all elements of the supply chain protect themselves from cyber attack.

Make UK estimated in March 2025 that there were over 250,000 active manufacturers and over 99% of these were SME or micro-entities where financial constraints affect decision-making. Providing grants and incentives to SMEs to encourage cyber security would encourage investment and support the sector as a whole.

As the UK pursues its net-zero commitments, manufacturers need help transitioning to low-carbon production. Tax credits or grants for clean technology adoption – from hydrogen furnaces to carbon capture and electrification of heat – would lower the risk of these big investments. Supporting firms through the transition not only ensures they remain globally competitive but also positions the UK as a leader in emerging green industries, securing long-term industrial resilience.

The impact of the adoption of a £1m cap on inheritance tax reliefs from April 2026 has been widely publicised and criticised in the farming sector but the impact on SMEs in the manufacturing sector has been less widely considered.

The restriction on relief has the potential to have a significant impact on the business as the shares in it are often the most valuable asset held by entrepreneurs leaving the executors of an estate with a challenge to fund the liability.

This liability may ultimately need to be funded from within the business leading to financial constraints that will affect business growth and impact on productivity therefore the rate of relief should be reconsidered to support UK manufacturing SMEs.