UK electrical manufacturers warn of confidence crisis

Business confidence among UK electrical manufacturers has fallen to its lowest level since the early stages of the Covid pandemic, with weakening demand now replacing supply chain disruption as the sector's biggest concern.

UK manufacturing trade association for the electrotechnical sector, BEAMA, says that its Q1 2026 Market Pulse survey shows more than half (51.7%) of manufacturers believe insufficient demand will be the biggest constraint on production over the coming quarter. The findings mark a considerable shift after several years in which businesses were primarily focused on component shortages, logistics disruption and rising input costs.

The quarterly survey recorded a sharp deterioration in confidence, with the industry's business confidence balance falling from +12 in the final quarter of 2025 to -28 in the first quarter of 2026 – a decline of 40 points and the weakest reading since Q1 2020.

Despite the downturn, Yselkla Farmer, chief executive of BEAMA, noted: "Manufacturers continue to invest because they believe in the long-term future of electrification, but the scale of investment depends on demand.”

Market stalling

Farmer added: “For the first time in years, we're seeing the heat pump market stall, an early warning sign that weak consumer uptake of electrification is starting to weigh on investment confidence across both heat technologies and electricity networks." 

The CEO acknowledged that the UK government has taken an important step by publishing its draft Strategic Policy Guidance for electricity networks, recognising the need for regulation that better supports growth, investment and the supply chain. 

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“That progress must now be matched by a clear and consistent approach to electrification policy. Recent decisions on Ofgem's ED3 methodology underline how important it is that the regulatory framework gives businesses and network operators the confidence to invest ahead of need,” Yselkla emphasised.

Under construction

BEAMA reports that the weakest outlook came from companies supplying the construction sector. Manufacturers of building electrical systems recorded a business confidence balance of -66.7, while businesses producing heating and ventilation equipment reported -50. Both sectors experienced broadly flat sales during the quarter, reflecting the continued slowdown in construction activity.

Suppliers serving the electrical transport and smart energy systems markets also reported negative confidence, although they recorded modest growth in sales. 

In contrast, manufacturers in the Electricity Networks Infrastructure (ENI) sector were the only group to record positive business confidence (+11.1), supported by continued investment in the UK's electricity grid. The sector also recorded the strongest sales balance (+66.7). However, ENI manufacturers warned about rising material costs and supply chain disruption. 

The report suggests that manufacturers have capacity to grow; but they need stronger demand. Average capacity utilisation remained unchanged from Q3 and Q4 2025, at 75%, slightly below the five-year average and below the 80% level last reached in 2021. BEAMA highlights that this suggests manufacturers have the capacity to scale up production as demand recovers. However, low utilisation means existing investment may not yet be generating the returns needed to support future growth. 

Recruitment drive

Despite the weaker outlook, recruitment intentions over the next 12 months remained positive, with investment plans recording a balance of +47. Longer-term investment sentiment also remained strong despite a slight decline, with companies continuing to prioritise spending on plant and equipment, digital technologies and AI, and product development over the next five years.

The survey also suggests that manufacturers still have scope to increase production should market conditions improve. Average factory capacity utilisation remained at 75%, unchanged from the previous two quarters but below both the industry's five-year average and the 80% utilisation last achieved in 2021. Although this indicates spare manufacturing capacity exists, lower utilisation also raises concerns about the return on previous investment.

Price of change

Although demand has become the industry's primary concern, manufacturers continue to face rising costs across global supply chains. After weak demand, respondents identified component and material availability as the next most significant potential constraint on output, followed by raw material prices and labour availability.

Businesses also pointed to the ongoing impact of geopolitical instability and freight disruption, alongside higher prices for key industrial materials such as copper, steel, aluminium and brass. Although most manufacturers reported that materials remain obtainable, many indicated that escalating costs are now posing a greater challenge than availability itself.

Farmer called for all stakeholders to focus on the challenges ahead. "We now need urgent action to remove the barriers to electrification, including addressing the cost imbalance between electricity and fossil fuels. Greater consumer uptake will give manufacturers and network operators the confidence to invest, helping us accelerate electrification, strengthen energy security and deliver net zero," she said.