UK manufacturers defy odds with Q1 sales surge, report finds

A remarkable first quarter sales performance for UK manufacturers has flown in the face of low business confidence amongst SMEs.

New figures show the average small-medium UK manufacturer made 30% more sales revenue in Q1 2025 than Q4 2024, and 13% more year-on-year. 

The findings – based on direct data from over 600 UK firms using Unleashed’s inventory management software – show pessimism amongst the UK business community may be unfounded.

Recent Q1 business confidence surveys show overall confidence turned negative for the first time since 2022 on the back of tax rises, inflation, weak growth, and increased global uncertainty.

However the stellar sales performance – alongside a 10.4% uptick in profitability – suggests international market turmoil has created a silver lining for the UK.

Joe Llewellyn, GM of ERP Small Business at The Access Group, the parent company of Unleashed, said the unusual business conditions of the first three months of the year had generally played out well for the country’s smaller producers, as had falling bank rates:

“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.”

Unleashed’s data also showed profitability improving as manufacturers held off purchasing new stock, preferring to eat into inventory reserves where possible. The average Gross Margin Return on Inventory (GMROI) lifted 10% against Q4 and 4% YoY, to £4.03 for every pound spent on buying stock – the highest level seen in two years.

Partly this was thanks to further falls in delivery lead times, down to 15 days on average. Faster delivery times allow businesses to reorder in smaller quantities, which is a more cost-efficient way to generate sales that improves margins. 

It’s also possible that the higher profit margins seen in Q1 were caused by purchasing managers deferring their inventory replenishment spend in response to low GBP-USD exchange rates. In January the pound dipped to 1.22 USD, making international purchases more expensive for UK buyers of US-dollar denominated goods. By the end of March, however, the exchange rate had trended favourably and reached 1.34 at the end of April.

Manufacturing performance

Almost all of the 12 manufacturing categories analysed saw a positive quarter-on-quarter sales performance, with only Electronics & Telecoms, and Food seeing a decline at -23% and -34% respectively. 

All categories benefited from reduced lead times – Sports & Entertainment led the way with a -45% drop, from 22 days to 12. The amount of excess stock held by each company also fell in many categories, including Industrial Machinery which saw the most dramatic decrease at -68%

Full set of results by manufacturing category:

Beverage (alcoholic and non-alcoholic)

Building and construction

Clothing and fashion

Electrical

Electronics / telecommunication

Food

Health and medical supplies

Industrial machinery

Personal care

Sport and entertainment