Industrial sector adapts as government support steps in

The industrial, manufacturing and logistics sector at Gleeds is at the forefront of industry, partnering with clients to provide tailored support that meets their requirements. 2025 has been a challenging year with the sector continuing to remain in downturn, while a cautious optimism of recovery remains. The last quarter of the year hasn’t deviated from this trend.

Mixed reaction to the Budget

Activity in the industry was subdued at the beginning of Q4 as the Budget loomed, with the hope that it would deliver good news. Chancellor of the Exchequer Rachel Reeves announced that she is focused on bolstering the UK’s manufacturing and industrial sectors, targeting investment, significant cost reduction for businesses and a drive on productivity and growth.

The immediate problem the sector is facing is financial pressures. To address this and to enhance the competitiveness of UK-based production, a reduction in electricity prices was revealed for specific consumers. It was also acknowledged that there needs to be more investment within the sector. It remains challenging attracting businesses to start and grow in the UK. To reverse this, major tax incentives have been introduced, including a 40% first year allowance, allowing businesses to write off a significant portion of their investment against tax immediately.

This all adds to a broader corporate tax roadmap intended to make the UK a more attractive place to grow a business, maintaining one of the lowest corporate tax rates in the G7.

Auto production still recovering

The start of Q4 was also difficult for the automotive industry. Jaguar Land Rover suffered a serious cyber-attack on 31 August 2025, which was so great that it knocked 0.17% off economic output in September 2025. Production lines didn’t start fully until mid-October, with a proper recovery not expected before January 2026.

A new tax was also announced for plug-in hybrids and battery electric vehicles (EV), which will attract a new ‘pay-per-mile tax’ from 2028. The introduction of this is confusing, as it comes at a time when the government has been working to boost EV uptake. There’s a danger it will undermine measures already introduced such as the raising the threshold of the expenditure car supplement (ECS) and injecting another £1.3b into the EV grant scheme.

However, it’s not all bad news as growth in the automotive sector is expected in 2026. The government has also introduced a new £1.5b automotive innovation fund as it continues to view it as a ‘pillar of strategic national importance’.

Aerospace deliveries rise

Good news was also felt in the aerospace industry as global aircraft deliveries rose to their highest October level since 2018 and the second strongest ever recorded. Manufacturers handed over 132 aircraft in that time.

However, orders significantly dipped with the lowest number placed since 2021 in October 2025. The current backlog of aircraft also remains at a high level, with 16,133 overdue. In real terms, this equates to over sixteen years of work and is valued between £225b - £266b to the UK economy. This is another example of why the challenges faced within the wider industry must be addressed by the UK government.

Skills challenges remain

A theme that has also continued throughout 2025 is the ongoing skills gap. Skills England reported earlier this year that 60% of manufacturing employers are having difficulties filling skilled vacancies due to a mismatch between training provision and industry needs.

It was announced in the Budget that funding for under 25 apprenticeships will be free from for SMEs, encouraging businesses to take on the scheme and expand the workforce. A further £13m in funding has been allocated for skills, business support and infrastructure to seven regional mayors, aiming to spread economic opportunity and growth across the country. The government will also maintain all Income Tax and National Insurance thresholds from their current level for three years from 2028.

Look ahead

While there has been action by the government to address the challenges faced by the sector, many still feel that they are waiting for clear signs of action to deliver the promised growth agenda as outlined in the Industrial Strategy. In 2026, the government must go further to provide businesses with the environment that they need to drive their operations forward.