British manufacturers recorded one of their strongest months in years in January.
The closely watched purchasing managers’ index (PMI) for manufacturing rose to 51.8 in January, up from 50.6 in December and its highest level since August 2024. Any reading above 50 indicates growth. The survey, based on responses from around 650 manufacturers, also showed new export orders increasing for the first time in four years. Demand improved from key markets including Europe, the US and China, while business optimism about the year ahead reached its highest point since before the 2024 Autumn Budget.
The improvement in manufacturing mirrors broader signs of economic strengthening. A combined PMI covering manufacturing and services pointed to the fastest expansion in overall business activity since April 2024. Official data has also been more positive, with retail sales beating expectations in December and GDP rising by an unexpected 0.3% in November.
Separate figures from the Institute of Directors showed economic confidence among its members improving in January to its highest level in eight months, despite remaining negative overall. Confidence in their own organisations, however, moved back into positive territory.
Together, the data suggest that uncertainty following Rachel Reeves’s November Budget has eased, after tax speculation previously weighed on investment and spending. However, the picture remains mixed. Inflation eased to 3.4% in December but is still above the Bank of England’s 2% target. At the same time, unemployment has risen to a near five-year high, and manufacturers continue to cut jobs, albeit at the slowest pace in over a year.