UK factory production showed signs of stabilising last month, with the sector posting its strongest performance since January, according to new industry data.

The S&P Global UK manufacturing purchasing managers’ index (PMI) recorded a score of 48.0 in July, up from 47.7 in June. While still below the growth threshold of 50.0, the figure signals a slower rate of decline and offers cautious optimism for the sector.

However, the result fell short of analysts’ expectations, who had forecast a reading of 48.2 for the month.

Rob Dobson, director at S&P Global Market Intelligence, said July’s figures offered “tentatively encouraging signals” with factory output close to stabilising and expectations for future production at their highest level since February.

But he warned that conditions remain fragile. “There is no assured path back to strong growth,” Dobson said. “Cost pressures, including higher minimum wages and employer national insurance contributions, continue to weigh on domestic demand, while export markets are being hit by geopolitical uncertainty and trade disruptions.”

The survey found that new orders fell at a quicker pace than in June, reflecting weak sentiment in both UK and international markets. Export demand remained under pressure, with firms citing the continued impact of US tariffs on UK goods.

Rising labour costs and soft demand also drove another monthly fall in employment, extending the sector’s job losses to nine consecutive months.

Despite the subdued outlook, there were signs of resilience among manufacturers. Dave Atkinson, UK head of manufacturing at Lloyds Bank, said businesses are preparing for recovery.

“UK manufacturers continue to face fast-changing global trade conditions and persistent cost pressures,” he said. “But they remain optimistic about long-term growth, with many focused on infrastructure investment and sustainability through the Industrial Strategy.”

Let me know if you’d like an investor-focused or sector-specific version as well.