Machinery Outlook for the United Kingdom 2025

Sector rating (Global): Medium Risk

Sector rating (United Kingdom): Sensitive Risk

• Global economic outlook: The global economic outlook remains relatively weak, with world GDP expected to grow only by +2.3% in 2025 (from +2.9% in 2024) and +2.8% in 2026, which could continue putting the sector’s growth at risk in the short-term. The machinery sector's vulnerability to economic slowdowns is becoming increasingly apparent. Still-high interest rates, persistent inflation concerns in some economies, and geopolitical tensions, could continue to weigh down companies’ capital expenditures, which are key for the machinery sector’s revenue growth.
• Construction & agriculture strain: Both the construction and agricultural sectors are experiencing restrained spending. The agriculture industry, particularly in the upstream food sector, has reduced capex on machinery due to weaker farm fundamentals. Similarly, construction companies are still holding back investments as high interest rates continue to limit growth. The construction equipment market is forecasted to remain subdued in the short term.
• Mining & natural resources to become the bright spot: After experiencing a slowdown in 2024, mining activity may experience a mild recovery in 2025. Yet, the longer-term outlook remains positive. As the global transition toward net-zero emissions continues, demand for metals and mining equipment is expected to grow, driven by increased mining activities for critical raw materials such as lithium, nickel, copper, and rare earth elements.
• Industrial policy: Industrial policies and subsidies are back with a bang, especially in major economies such as the US, China, India, Germany, and Brazil. Governments are increasingly getting involved in setting industrial priorities and supporting strategic industries through subsidies to promote innovation and technology diffusion.
• Businesses and consumers’ perception: In April 2025, economic sentiment and employment expectations declined in the EU, with the Economic Sentiment Indicator dropping in both the EU and Euro Area. Consumer confidence also fell for the second consecutive month, reaching its lowest level in 18 months, and all indicators remained below their long-term averages. This echoes the idea that the economic cycle is not at its best, which is negative for the sector.
• Commodity price volatility:  In 2025, the prices of key metals (steel, nickel, aluminum, and copper) continues experiencing notable volatility, impacting the production costs of machinery producers. Steel prices fluctuated due to varying global demand and supply constraints, while nickel prices were influenced by supply disruptions in Indonesia and increased demand from the electric vehicle sector. Aluminum prices faced downward pressure amid economic uncertainties, despite China's production caps. Copper markets were particularly volatile, with US tariff threats leading to significant import surges and regional shortages, disrupting supply chains. This price instability complicates cost forecasting and procurement strategies for machinery manufacturers, potentially eroding profit margins and hindering investment planning.
• AI adoption: Big players in the sector have started to implement AI, automation and machine learning to their production processes. With all sectors looking for efficiencies, being able to bring to the market leading edge machinery represents a great opportunity for companies to enlarge their market share. We believe the ongoing tech boom (particularly from AI) will generate multiple benefits both for sellers and users of machinery equipment. Companies with a more complete portfolio that combines hardware, software, cutting-edge technology, and services will largely control this market.
• US trade tensions: Higher import tariffs under the new Trump administration could significantly disrupt the global machinery sector, particularly impacting Chinese producers who are major exporters of industrial components and equipment. Tariffs would raise the cost of Chinese machinery in the US, weakening their competitiveness and potentially triggering a shift in global supply chains as buyers seek alternative sources. This could lead to overcapacity and price pressure in China, while increasing costs for US manufacturers reliant on imported parts.

The global machinery & equipment sector remains a critical industry with an estimated market value of approximately USD285bn, heavily reliant on the APAC (34%) and North America (30%) regions, which together account for nearly two-thirds of the total market. The rest of the market is split between EMEA (18%), South America (11%), and other regions (11%).

As one of the most cyclical sectors, machinery & equipment is often hit hard during slowdowns and recessions. The post-pandemic global recovery was notably strong, with revenues in Europe surging by approximately +13% and +17% y/y in 2021 and 2022, respectively, reaching a peak in 2023 (see Figure 1). This growth was driven by pent-up demand and a positive supply-chain recovery. Conversely, in 2024 the sector experienced a stagnation, with revenues slightly declining by -0.6% on average, due to the weakened economic outlook: interest rates, global economic uncertainty, and cautious investment behavior across key industries like construction and agriculture. For 2025 we expect the sector to continue with a muted performance, with revenues expected to grow only by +0.4% y/y. This subdued growth is driven by ongoing geopolitical tensions, persistent economic uncertainty, and cautious investment behavior from manufacturers and machinery buyers.

Figure 1: Average annual revenue of top 50 machinery companies in Europe (EUR million)

The UK machinery & equipment sector is a vital component of the country’s manufacturing industry, contributing to around 7% to its value added, accounting for 6% of employment, and representing 10% of total exports. Globally, the UK ranks as the 10th largest exporter of machinery products and stands as Europe’s leading producer of construction equipment.

However, the UK machinery sector has been experiencing a challenging period recently, marked by declining manufacturing output and profitability. In May 2025, the manufacturing Purchasing Managers' Index (PMI) dropped to 45.1, indicating a contraction in the sector, with job cuts accelerating at one of the fastest rates since the global financial crisis. This marks the 8^th consecutive month for this index to be in the contraction territory. As shown in Figure 2, new orders (key for measuring demand) have also been in contraction since summer 2024, and as per latest data, the trend in the last months of 2025 does not seem to improve. As demand is weak, so is the output, which stood at 44.7 in May and has been under the threshold of 50 since November last year. This downturn is attributed to factors such as rising domestic costs, uncertainties surrounding US tariffs, and increased operating expenses from recent tax changes. Nevertheless, we should start seeing signs of mild recovery in specific segments. For instance, the construction equipment market has been showing favorable growth, driven by increased public infrastructure spending. Technological advancements, such as the adoption of hybrid and electric-powered equipment, have also contributed to this growth.

In response to the economic and geopolitical challenges, industry initiatives are underway to bolster the sector's resilience. Last year, for instance, the Manufacturing Technologies Association (MTA) has launched “Knowledge Hubs” at MACH-2024¹ to promote the adoption of automation, robotics, artificial intelligence, and additive manufacturing among UK manufacturers. These efforts aim to enhance productivity and competitiveness in the face of economic pressures.

Figure 2: Manufacturing PMIs data in the UK, production components, monthly

From a financial point of view, the challenges the sector has been facing in the previous quarters has led companies to see a decline in operating margins. Clearly, production costs have been high and raw material prices – particularly metals - have been showing a lot of volatility. Truly, latest data has been showing a mixed pricing environment. Although output prices have been increasing, so have input prices (see Figure 3). Nevertheless, we think the worst is behind. From a pricing perspective, inflation in the UK has recede from 9.1% and 7.3% in 2022 and 2023, respectively, to only 2.5% in 2024. For 2025 we estimate CPI to be at 3.2%. This relative improvement, compared to previous years, could certainly provide a sales boost to the sector.

Figure 3: Manufacturing PMIs in the UK, pricing components, monthly

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¹ MACH is the UK’s premier manufacturing technologies exhibition, held biennially and organized by the Manufacturing Technologies Association (MTA). It showcases the latest advancements in manufacturing and engineering technologies, including machinery, automation, robotics, digital manufacturing, and additive manufacturing (3D printing)

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