Almost nine in 10 UK manufacturers are using automation of robotics, operations and storage to manage business disruption and demand volatility, according to research from Barclays.

The bank’s Business Prosperity Index found 87 per cent of manufacturing leaders surveyed said automation was helping them, while 94 per cent expected their business to prosper over the next 12 months.

The confidence comes despite cost pressure. Almost nine in 10 (89 per cent) said energy costs were constraining growth or investment to some extent, according to the survey.

Barclays said businesses were responding by investing in automation, planning further ahead and pursuing work in defence, national security and critical infrastructure.

Barclays’ anonymised client data from around 30,000 UK manufacturing businesses, comparing the second quarter of 2026 with the same period of 2025, points to a split between larger companies and smaller ones.

Among larger manufacturers served by Barclays UK Corporate Bank, cash inflows fell 3.5 per cent year on year while loan balances rose 12.8 per cent. The bank said this suggested those businesses were continuing to invest despite softer trading conditions.

SME manufacturers served by Barclays Business Banking recorded a 1.4 per cent increase in cash inflows. Their average loan balances fell 17.7 per cent, even though the number of loans rose 1.1 per cent, and savings balances also rose 1.1 per cent. Barclays said this suggested smaller firms were prioritising financial flexibility.

Across the survey, more than three quarters (76 per cent) of manufacturers said they were planning major investment, sourcing and supply-chain decisions further ahead than a year ago. Respondents expected to increase spending by an average of 32 per cent over the next 12 months, and two thirds (66 per cent) had borrowed to fund investment over the past year.

Manufacturers reported benefits from automation including improved order fulfilment and delivery performance (23 per cent), better forecasting and decision-making through data insights (23 per cent) and stronger supply chain resilience (22 per cent). The findings follow reporting on why manufacturing SMEs are turning to automation to address skills shortages.

Over the next three to five years, 27 per cent plan to invest in agentic AI or AI-driven planning, forecasting and decision-making systems, 25 per cent in cybersecurity and operational resilience technologies, and 22 per cent in logistics automation.

On storage, 13 per cent have increased on-site storage or are holding additional buffer stock, and 10 per cent are expanding storage capacity. Growth in production volumes was the most cited driver of extra storage needs (22 per cent), followed by geopolitical supply-chain uncertainty and increased customer stockpiling (both 19 per cent).

Tom Horton, head of manufacturing at Barclays UK Corporate Bank, said: “Despite continued pressure from energy costs and a more uncertain global environment, businesses are responding by looking further ahead, investing with greater certainty and building more resilient operating models.”

He added: “From advanced manufacturing and AI-enabled operations to defence supply chains and national infrastructure projects, businesses are positioning themselves to capitalise on long-term growth markets.”

More than three quarters (77 per cent) of manufacturers surveyed view working with the defence sector more positively than 12 months ago, and 72 per cent reported increased demand from defence and security customers. The government’s Defence Industrial Strategy 2025 set out plans to raise defence spending to 2.6 per cent of GDP by 2027.

According to Barclays, 27 per cent plan to develop or sell defence-related products over the next three to five years, with the same proportion targeting dual-use products with civilian and military applications. Some 81 per cent said they had made changes to support defence, national security and critical infrastructure work, including planned investment in physical security upgrades (66 per cent) and security clearances and specialist recruitment (63 per cent). The Ministry of Defence has separately set up a unit to give small defence firms easier access to contracts.

Sarah Collins, head of SME industries at Barclays Business Banking, said: “For smaller businesses in particular, balancing investment with day-to-day resilience remains a priority.”

Barclays said its £22bn Business Prosperity Fund is available to provide lending and refinancing to eligible Business Banking and UK Corporate Banking clients.

About the author

Amy Ingham

Amy Ingham is a reporter at Business Matters, covering UK business news with a focus on breaking news, business policy, late payments and insolvency. She joined the magazine in 2026 after completing the NCTJ Diploma in Journalism at Harlow College’s journalism school. Her recent reporting includes British Steel’s nationalisation and its impact on SME suppliers, the decline in late payments by large firms, and Insolvency Service director disqualifications. Reach her at aingham@cbmeg.co.uk.

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The executive chairman of Paul Smith has questioned the ethics of Frasers Group’s £43.3m takeover of Harvey Nichols, completed through a pre-pack administration in August that is expected to leave suppliers recovering less than 15 per cent of their debts.

“I personally find this whole thing about pre-pack administrations just dubious in terms of ethics and the way business gets done,” Ewan Venters, who was appointed chair of the fashion house last October, told the BBC Big Boss podcast.

Frasers, which is controlled by the billionaire Mike Ashley, bought the luxury department store through the pre-pack process. Critics argue such deals can leave creditors carrying unpaid debts.

According to the latest estimates from administrators, Harvey Nichols’ unsecured creditors, which include Victoria Beckham, Jimmy Choo and Canada Goose, will receive less than 15 per cent of the £270.5m they were owed, leaving suppliers with less than 15p in the pound. Other unsecured creditors include Jo Malone, Puig and Estée Lauder.

Filings show Paul Smith was owed £96,537.50. Preferential creditors such as HM Revenue & Customs are expected to be repaid in full.

“I find it all a bit odd and I don’t think that’s a kind way of doing business,” Venters said. He conceded, however, that Harvey Nichols may have been “about to go to the wall and maybe Mike and his team will … keep it going”.

Venters said kindness was too often seen as a “soft” characteristic in business. “Kindness doesn’t mean just soft. But I think put the value of kindness at the heart of doing business, and I think you do business in a better way, with better results, with a happier outcome. All too often you just see very unkind behaviour which I don’t think leads to a healthier society.”

Pre-pack administrations, in which a company’s business or assets are sold before an administrator is formally appointed, have faced scrutiny over creditor involvement and sales below market value, according to a House of Commons Library briefing.

Frasers declined to comment.

The deal preserved more than 1,000 jobs and secured the immediate future of Harvey Nichols’ UK stores, including its Knightsbridge flagship. The retailer had failed to make a profit for years under its former owner, the Hong Kong billionaire Sir Dickson Poon, who faces losses of £100m from the sale.

The takeover had already raised concern among brand partners, with Frasers reportedly forcing its way into the auction process this summer. The Sports Direct owner’s reputation was previously damaged by Matches Fashion, which was placed into administration in 2024 weeks after Frasers acquired it, putting hundreds of jobs at risk and leaving suppliers unpaid.

In luxury, brands are struggling to attract Gen Z customers, with slower UK sales compounded by the former Conservative government scrapping VAT-free tourist shopping.

Ashley has long sought to move his retail group, which includes Flannels and House of Fraser, upmarket. This summer Frasers increased its stake in Hugo Boss to just below the 50 per cent needed for majority control and installed its chief executive, Michael Murray, as chairman. In July it disclosed a stake in Burberry.

Paul Smith, founded in 1970, reported a near tripling in pre-tax losses to £16.7m in its latest annual accounts. Slower demand and problems in its wholesale operation have contributed to six years of losses.

Venters said he had brought a “more razor-like focus” to the business, including expanding its direct-to-consumer arm and efforts to “right size the wholesale trade and the costs associated with it.”

He said previous management teams had “taken their eye off the ball” and missed the “disruptive behaviour” in the wholesale market, including consolidation that has allowed larger retailers to demand bigger discounts and promotional support. “You end up with a cost base that is higher than you need to service that, and a real conundrum as to how you still get growth.”

Venters said this year would be “a step change”. “We will still be a lossmaking business but we will probably nearly halve the losses in the first year of recovery. And we can see a growth plan that gets us back into profitability and where the business needs to be.”

About the author

Jamie Young

Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the ‘covid era’ and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine’s coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk

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