Manufacturing Industry Trends to Watch in 2025
Businesses in the manufacturing sector contribute significantly to the economy by utilising raw materials to create a wide range of finished products. However, the sentiment among UK manufacturers has been deteriorating, and the industry has witnessed several significant challenges in the past few years. Geopolitical instability, economic uncertainty and stagnant domestic demand weigh heavily on the sector—so much so that, in the fourth quarter of 2024, business confidence among Britain’s manufacturers dipped at the sharpest rate since the COVID-19 pandemic.
For maximum success in 2025, manufacturing organisations should monitor the latest sector developments and appropriately adjust operations and risk management practices to respond to these shifts. This article details the manufacturing industry developments organisations should stay abreast of in 2025.
Digital Transformation
Manufacturers will continue to embrace digital transformation and technology adoption in 2025. Businesses will look to these tools to improve their operations by enhancing productivity and forecasting and mitigating supply chain disruptions. Evaluating efficiency opportunities may be especially important in 2025 as America shifts back to a Republican administration. Specifically, President Donald Trump’s anticipated tariff on US imports could disrupt global trade patterns, and UK suppliers reliant on European or Asian components could face delays and increased costs, impacting the entire production line. One tool that is gaining increased traction is generative artificial intelligence (AI). Generative AI is a type of AI that receives data inputs and creates new content (eg text, images, audio) based on that data. Generative AI can be used to create optimal product designs, improve quality control, address supply chain issues and enhance predictive maintenance. Generative AI can also help manufacturers promptly respond to client requests and questions.
In addition, manufacturers are implementing robotics, the internet of things (IoT) and blockchain to improve their businesses’ efficiency and overall performance capabilities. Furthermore, smart factory initiatives are also being utilised to increase network capacity, reduce delays in network communication and enable high-speed data processing. Such solutions often permit manufacturing businesses to minimise downtime on the production floor and elevate performance. 68% of manufacturers have said that implementing smart factory technologies has made them more productive, and 51% have witnessed increased agility.
Technology undoubtedly has several benefits, but it’s worth noting that its use can introduce various risks. For instance, the increased connectivity via the IoT and reliance on digital systems can expose manufacturers to cyber-threats like data breaches, ransomware attacks and sabotage. Also, collecting and processing large amounts of data raises concerns about privacy compliance and the protection of sensitive information. These and other concerns may delay some digital transformation journeys, especially for smaller businesses with scant resources. However, even simple tools—such as enterprise resource planning software or digital inventory management—can help smaller businesses remain competitive.
Supply Chain Challenges
Although supply chains are showing signs of normalising following a challenging few years, disruptions remain a significant risk due to various external threats, such as natural disasters, geopolitical tensions, trade disputes and unexpected events like the COVID-19 pandemic. As such, the manufacturing sector is witnessing a renewed interest in localised manufacturing. Some manufacturing businesses have also begun engaging in nearshoring and reshoring. Nearshoring involves shifting production from overseas to nearby countries, while reshoring entails moving production back into a business’s home country. Businesses that implement these strategies may be able to minimise their risks of being impacted by global shipment delays and associated supply chain disruptions. According to research, 58% of UK manufacturers are already reshoring, with 90% reporting benefits.
Other tactics to help ensure supply chain resiliency in 2025 may include:
• Strengthening relationships. Manufacturing businesses are more likely to receive additional support when navigating supply chain issues by building strong relationships with their suppliers. For example, businesses with solid supplier connections may benefit from solutions like modified shipment routes and prioritised access to high demand materials as they become available.
• Diversifying Suppliers. Some manufacturing businesses have added contingencies to their supply chains by investing in several suppliers for the same materials instead of relying on a small selection of primary suppliers. With these diversification strategies, businesses can increase the likelihood of maintaining access to essential production materials even if their primary suppliers are experiencing disruptions.
Labour Challenges
The manufacturing industry continues to grapple with skilled labour shortages. In fact, 75% of manufacturers identify skills shortages as their biggest barrier to growth, and 97% say that hiring and retaining skilled labour presents growth challenges. This issue may be even more pressing for smaller businesses, which often don’t have the resources to compete for talent.
One additional concern is the mindset of young talent. Indeed, the manufacturing industry is often overlooked by younger people, who may favour opportunities in other sectors, such as technology and finance. As such, collaborating with schools and universities and organising community events (eg job fairs) may help organisations encourage the next generation of manufacturing employees in 2025.
Other measures manufacturing businesses may leverage to address labour challenges include implementing reskilling programmes, offering flexibility and more competitive wages and benefits, and attempting to bring employees who recently left the industry back to work through various incentives (eg flexible employment arrangements and career advancement opportunities).
It may also be beneficial for manufactures to explore underrepresented demographics to increase their talent pools and expand their searches by using talent recruitment agencies. Cultivating and maintaining a positive and safety forward company culture can also help businesses attract and retain employees and reduce workplace accidents.
Sustainability
As consumers’ demand for sustainable products grows, sustainability may be an essential consideration for manufacturing organisations in 2025. Several studies have shown that people increasingly opt for products produced by companies with “green” credentials, and they may even be willing to pay more. In fact, consumers are willing to pay 9.7% more for sustainably produced or sourced goods.
The UK government’s commitment to achieving net-zero emissions by 2050 is another factor behind businesses beginning to rethink their environmental impact. However, sustainable practices often require significant investments in technology, equipment and processes, which may deter some companies. Simple changes like optimising material usage or reducing waste through better production planning can help win favour with consumers while controlling costs.

Conclusion
Several trends are influencing the manufacturing sector this year. By staying on top of these developments and mitigating their associated exposures, manufacturing businesses can effectively position themselves to maintain long-term growth and operational success.
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