UK Manufacturers Invest in Automation Amid Energy Costs, Geopolitics

Confidence persists despite headwinds

UK manufacturers are maintaining strong business confidence while confronting a dual challenge: rising energy costs and geopolitical volatility. A new Barclays survey of more than 500 manufacturing decision-makers reveals that 94 percent expect their businesses to prosper over the next year, even as 89 percent report energy costs constraining growth or investment.

The response has been decisive. Three-quarters of manufacturers now plan major investment, sourcing, and supply-chain decisions further ahead than they did 12 months ago, with anticipated spending increases averaging 32 percent over the coming year. Two-thirds borrowed to fund investment in the past year alone, according to the research first reported by Barclays.

Automation becomes core resilience strategy

Automation has emerged as the primary tool for managing disruption. Eighty-seven percent of manufacturers surveyed are deploying automation across robotics, operations, and storage to navigate demand volatility and business disruption.

The benefits extend beyond efficiency. Twenty-three percent cite improved order fulfillment and delivery performance, while an equal share point to better forecasting and decision-making through data insights. Another 22 percent report stronger supply chain resilience.

Looking three to five years out, investment priorities are shifting toward advanced capabilities. Twenty-seven percent plan to deploy agentic AI or AI-driven planning and forecasting systems, while 25 percent are targeting cybersecurity and operational resilience technologies. Logistics automation ranks third at 22 percent.

Manufacturers are also building physical buffers. Thirteen percent have increased on-site storage or buffer stock, and 10 percent are actively expanding storage capacity. Production volume growth drives 22 percent of these decisions, followed closely by geopolitical supply-chain uncertainty and customer stockpiling, each at 19 percent.

Defence sector opportunities accelerate

Defence and critical infrastructure markets are reshaping manufacturer priorities. Seventy-seven percent view working with the defence sector more positively than a year ago, and 72 percent have experienced increased demand from defence and security customers.

This shift is influencing long-term strategy. Over the next three to five years, 27 percent plan to develop or sell defence-related products, with an equal share targeting dual-use products serving both civilian and military applications.

Eighty-one percent have already made operational changes to support defence, national security, and critical infrastructure opportunities. These include physical security upgrades (66 percent) and security clearances with specialist recruitment (63 percent).

Why it matters

The manufacturing sector's simultaneous embrace of automation and defence opportunities signals a fundamental recalibration in response to global instability. As traditional supply chains face persistent disruption and energy costs remain elevated, manufacturers are choosing to invest in resilience infrastructure rather than retreat. The 76 percent planning further ahead represents a strategic shift from reactive management to proactive positioning—particularly significant as defence spending across Western nations continues expanding. Companies building automation capabilities and security clearances now are positioning for a multi-year cycle of defence and critical infrastructure investment that extends well beyond current geopolitical tensions.

Divergence between large firms and SMEs

Barclays' anonymized data from approximately 30,000 UK manufacturing clients reveals a growing split between larger manufacturers and small-to-medium enterprises. Among larger manufacturers served by Barclays UK Corporate Bank, cash inflows fell 3.5 percent year-over-year in Q2 2026 compared to Q2 2025, while loan balances increased 12.8 percent—suggesting continued investment despite softer trading conditions.

SME manufacturers showed a different pattern. Cash inflows rose 1.4 percent, but average loan balances dropped 17.7 percent even as the number of loans increased 1.1 percent. Savings balances also grew 1.1 percent, indicating smaller firms are prioritizing financial flexibility over expansion.

The research was conducted by Censuswide on behalf of Barclays between August 14-24, 2026, and first reported by Barclays.