UK small and medium-sized manufacturers have posted a surprisingly strong first quarter in 2025, despite wider pessimism in the business community, new data reveals.
Figures from Unleashed, an inventory management platform used by more than 600 UK firms, show that average sales revenue rose by 30% in Q1 2025 compared to Q4 2024 — and was up 13% year-on-year.
The results suggest that the wave of low confidence sweeping through UK businesses may be overstated.
Recent Q1 surveys indicated that business confidence had turned negative for the first time since 2022, weighed down by tax increases, stubborn inflation, sluggish growth, and global uncertainty.
Yet this robust sales performance — coupled with a 10.4% rise in profitability — indicates that international market disruption may have offered an unexpected boost for UK manufacturers.
Joe Llewellyn, General Manager of ERP Small Business at The Access Group, parent company of Unleashed, said the unusual trading conditions in the first three months of the year had worked in the favour of many smaller producers. Falling interest rates had also provided support.
“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.”
The data also shows that manufacturers boosted profitability by adopting more cautious inventory strategies. Many firms chose to reduce new stock purchases and instead relied on existing reserves.
As a result, the average Gross Margin Return on Inventory (GMROI) rose by 10% versus Q4 and 4% year-on-year, reaching £4.03 returned for every £1 spent on stock — the highest level seen in two years.
Improved supply chain performance also played a role. Delivery lead times fell to an average of 15 days, allowing firms to order smaller, more frequent quantities — an approach that helps improve margins.
Currency movements may have further influenced inventory decisions. In January, a weaker pound — which fell to 1.22 USD — made imports of US-dollar denominated goods more costly, encouraging purchasing managers to hold off on replenishing stock.
By late March, however, the exchange rate had recovered to 1.34 USD, easing some of that pressure.