New data from the Manufacturing Health Index provided by Unleashed indicates this growth occurred despite a decline in small-medium enterprise (SME) business confidence to its lowest point in two years.

The negative sentiment among businesses due to global uncertainty, inflation, and tax increases may not be entirely justified, the data suggests.

The index is created by compiling data on purchases, sales, and stock movements from over 600 UK manufacturers, using Unleashed’s inventory management software.

Unleashed owner The Access Group ERP Small Business GM Joe Llewellyn said: “Anecdotally, what we’re hearing from some of our customers is that Q1 brought welcome windfalls. Some tariff-affected international customers have turned to UK firms to do business, while others raced to order more before tariff pauses came off. That’s delivered a shot in the arm for some firms, but more importantly we’re hearing that steadily falling bank rates are starting to stimulate the economy, which obviously is very welcome to UK manufacturers who’ve posted a really strong start to the year.”

Although sales revenue increased, profitability metrics such as gross margin return on inventory (GMROI) experienced a downturn. Clothing manufacturers saw a 53% decline in GMROI compared to the previous quarter and a 36% decrease YoY, with returns of £4.14 for every pound invested in inventory.

Decline in profit comes as excess stock level rose by 76% on a YoY basis and 51% on quarterly basis.

Delivery lead times averaged 19 days as per the index, marking a 24% decline from 25 days in previous quarter and 14% decline from 22 days in the same period last year.

However, purchase orders stood at 313 as of Q1 2025, declining by 7% from last year’s quarter of 336 orders and declined 22% previous quarter orders of 399.  

When examining all 12 manufacturing categories analysed by Unleashed, there was an overall increase of 30% in sales in Q1 2025 compared to Q4 2024 and a YoY rise of 13%. Profitability also saw an upturn of 10% in Q1 with £4.03 generated per pound spent on stock.

The broader manufacturing sector’s profit margins may have been influenced by purchasing managers delaying inventory purchases due to unfavourable GBP-USD exchange rates earlier in the year. However, by April’s end, the exchange rate had improved.

Except for electronics & telecoms and food categories, which saw declines of 23% and 34% respectively, most manufacturing sectors experienced positive sales performance quarter-on-quarter.

Lead times reduced across all categories, with Sports & Entertainment leading at a 45% reduction.

Additionally, many categories reported decreases in excess stock levels, with industrial machinery observing the most significant drop at 68%.

By Just Style