Small and medium-sized UK manufacturers have recorded a surprise surge in sales for Q1 2025, defying widespread pessimism within the business community.
New data from inventory management platform Unleashed, part of The Access Group, shows the average SME manufacturer increased sales revenue by 30% in Q1 2025 compared to the previous quarter, and by 13% year-on-year.
The figures, based on data from more than 600 UK manufacturers, contrast sharply with recent business confidence surveys that show sentiment among small businesses turned negative for the first time since 2022.
Concerns about inflation, tax increases, sluggish economic growth, and global instability have weighed heavily on expectations.
However, the unexpectedly strong performance — including a 10.4% rise in profitability — suggests smaller manufacturers have found opportunity amid the uncertainty.
One key driver of improved margins was a strategic drawdown of inventory. Many businesses opted to delay restocking, choosing instead to sell from existing reserves.
As a result, the average Gross Margin Return on Inventory (GMROI) rose to £4.03 per pound spent on stock — the highest figure in two years, and a 10% increase quarter-on-quarter.
Shorter delivery lead times also played a role, falling to an average of 15 days. This allowed firms to place smaller, more frequent orders, enhancing cost efficiency and improving profitability.
Exchange rate fluctuations may have further influenced purchasing strategies. A weak pound early in the quarter – hitting a low of 1.22 against the US dollar in January – likely discouraged imports priced in dollars. As the pound recovered to 1.34 by the end of April, purchasing conditions improved.
Performance varied by sector, but most of the 12 manufacturing categories analysed saw quarterly sales growth. Only electronics & telecoms (-23%) and food (-34%) reported declines.
In contrast, categories such as sports & entertainment benefited most from logistics improvements, with average lead times falling from 22 to 12 days — a 45% reduction.
Stockpiles also shrank across several categories. industrial machinery manufacturers, in particular, saw excess inventory levels fall by 68%.
The data suggests that, at least for now, smaller UK manufacturers are demonstrating resilience and adaptability in the face of broader economic headwinds.
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