Regional manufacturers are reporting a second consecutive quarter of declining output, with export orders falling sharply as global demand softens and sterling strengthens.
Output at Midlands manufacturing firms fell by 3.1 per cent in the second quarter of 2026, according to data compiled by the regional chamber of commerce. It is the second consecutive quarterly decline and the sharpest fall since the supply chain disruptions of 2022.
The figures reflect a broader slowdown in global manufacturing demand, compounded by a strengthening pound that has made exports more expensive in key markets. Several firms that supply components to the automotive and aerospace sectors said order books had thinned noticeably since the spring.
The impact is concentrated in medium-sized firms — those employing between 50 and 250 people — that are too large to pivot quickly but too small to absorb sustained revenue falls without reducing headcount. Robert Slade spoke to four such firms for this report. Two had already made redundancies; the other two said they were reviewing staffing levels.
One managing director, who asked not to be named, said the combination of weaker orders and rising energy costs had created a "perfect storm." His firm, which makes precision components for the aerospace sector, had seen its order book fall by 22 per cent since January. "We've been through difficult periods before," he said. "But this feels different. The demand isn't coming back quickly."
The chamber of commerce is forecasting a modest recovery in the third quarter, contingent on a stabilisation of sterling and an improvement in global demand. Several economists contacted by the Chronicle were more cautious, noting that the factors driving the slowdown are largely external and not easily influenced by domestic policy.