UK manufacturers warn of further price hikes unless Autumn Budget tackles rising costs
19 November 2025 
UK SME manufacturers are urging the Government to act on tax and cost pressures in the Autumn Budget, as new research from Paragon Bank highlights strain on the sector.
The survey of 250 SME manufacturing leaders, commissioned by the FTSE 250 lender, revealed that manufacturing has been hit hardest of all major sectors by Employer National Insurance Contributions (NICs) from the previous Budget, with 78% affected.
Four in 10 (40%) SME manufacturers have already raised prices to offset rising overheads and protect margins.
As a result, 46% are calling for the Government to prioritise employee tax and costs in the upcoming Autumn Budget, with business tax reform (46%), business rates (46%), innovation and investment incentives (36%) and skills and training (31%) also high on the agenda for manufacturers. Access to finance (31%) was also highlighted, with traditional high street lenders often underserving the sector.
Despite ranking 11th globally in manufacturing output, UK manufacturing SMEs have been among the most impacted by measures implemented in the previous Budget. The survey revealed that alongside the NICs increase, manufacturing SMEs were also impacted by the corporation tax rise (74%), national minimum wage increase (69%) and capital gains tax increase (62%).
Rising operational costs was cited as the main challenge manufacturing SME leaders now face (48%), followed by employment costs (38%), skills shortages (33%), supply chain issues, regulatory burden and trade tariffs (all 25%).
In response to these pressures, manufacturers are showing signs of adaptability: over a third (35%) of manufacturers are investing in new technologies and automation, with 27% exploring new markets or customer segments and 24% investing in staff training.
Others are acting defensively to preserve cash flow, with over a quarter (28%) scaling back planned investments and more than one in five (22%) admitting they have implemented a hiring freeze.
Perhaps unsurprisingly, just one in two (50%) of manufacturing leaders and decision makers rated the Government’s support for SMEs in its first year as “good”, with roughly the same (52%) saying they feel optimistic about the outlook for the UK economy over the next 12 months. Despite these challenges, manufacturing SMEs remain resilient – over two thirds (67%) say they are optimistic about their own business prospects over the next year.
Phil Hughes, Deputy Managing Director of Paragon SME Lending, said: “The UK has a manufacturing industry to be proud of, but our latest research reveals their clear message to Government: adding more taxation to a sector already bearing the brunt of increasing costs risks hindering growth and hiking prices. As a lender working with 16,000 SMEs at the coalface, we see firsthand the pressures they face and the innovation they demonstrate day in, day out – but ongoing Budget uncertainty is only intensifying a challenging environment.
“With many manufacturers finding it difficult to secure finance from traditional high street lenders, Paragon is here to bridge that gap and help the sector thrive – but finance is only part of the solution and Government policy has a big role to play. To earn confidence from manufacturers, the Chancellor needs to give clarity on how Government is going to ease operational costs and level the playing field, so manufacturers are not left shouldering the burden of fiscal measures.”