grenke’s Renewed Lease of Life Report has found that UK SMEs have undergone a fundamental shift in mindset – and behaviour – from growth to resilience. Surveying 500 SMEs across the UK, the report found that just 6% are currently confident and ready to grow, with over a third (37%) struggling or under significant pressure. For the manufacturing sector, 35% are struggling or under significant pressure, with 26% confident – broadly in line with the national picture. However, the sector faces some of the most intense individual pressures of any industry surveyed, with energy costs and supply chain issues bearing down hardest.
The new Seven-Month Economy
As businesses prioritise short-term stability over long-term growth, UK SMEs are, on average, planning major investment decisions just seven months ahead; just 14% are currently able to see beyond the next 12 months. Three-quarters (74%) say making the wrong long-term investment decision feels riskier than it did two years ago. For manufacturing SMEs, the planning horizon averages 7.31 months. The top challenges holding back growth in the sector are stark: energy costs (94%) – by far the highest of any sector surveyed – supply chain issues (73%), cashflow issues (63%), access to finance (58%) and keeping pace with technology and AI (55%).
Growth on hold
With 85% of UK SMEs experiencing cashflow pressure, 42% are cutting costs as their primary survival strategy. In manufacturing, 36% are cutting costs but 30% are delaying investment – a higher proportion than many sectors, suggesting manufacturers are making calculated decisions to defer rather than simply retrench. 83% of all SMEs identified at least one area that has stagnated. For manufacturing, hiring staff (36%) is the hardest-hit area, followed by launching new products or services (24%), investment in training (26%) and innovation (18%). Energy costs (55%) are also the single biggest factor making manufacturers more cautious about major equipment investment, well above the national average of 42%.
Sub-optimal equipment, sub-optimal business
Nearly half (46%) of SME equipment is sub-optimal nationally; in manufacturing the figure is 47%. The consequences are particularly acute: 82% say underperforming equipment increases running costs, 68% say it reduces productivity and 68% say it is holding their business back from its full potential. More downtime (67%) and difficulty attracting staff (63%) are further compounding factors in a sector where equipment performance is directly tied to output, delivery and competitiveness.
The Great Upgrade: the pressure to modernise
Over half (57%) of UK SMEs say they are under growing pressure to modernise. For manufacturing businesses, 51% feel this pressure, driven by keeping pace with competitors using more modern technology (43%), energy efficiency and sustainability requirements (40%), automation and AI (38%) and the need to integrate equipment with digital systems (37%). Ongoing cost volatility and inflation (35%) is the second biggest factor increasing investment caution in manufacturing – above the national average of 31%. In terms of unlocking investment, predictable monthly costs (38%), greater economic certainty (40%), maintenance included (43%) and flexible upgrade options (39%) all rank highly.
The leasing paradox
Nationally, 90% of SMEs see clear benefits in leasing, 63% say flexibility is now more valuable than ownership, and 61% say leasing would help unlock growth opportunities. Manufacturing leasing adoption sits at 38%, in line with the national average, with a further 36% considering it – the highest consideration rate of any sector. When it comes to finance preferences, 43% of manufacturers would opt for a business loan if they needed equipment in the next three months – significantly above the national average of 28% – with leasing chosen by 15%. The most compelling leasing benefits for manufacturers are improved productivity (48%) and cashflow support (43%) – the two areas where sub-optimal equipment is already hitting hardest.
Commenting on the Renewed Lease of Life Report, David Horton, UK MD of Sales, grenke, said: “The story of the UK SME in 2026 is one of genuine endurance in the face of relentless and compounding pressure. Businesses know what they need to do: what they need is the confidence, conditions and partners to make the next steps feel possible.”
“Rather than waiting for the economy to improve, the real opportunity is to reduce decision risk, restore the conditions for confidence and help manufacturers move from belief to action. This is how we’ll bring a renewed lease of life to the businesses that are the heartbeat of the UK economy.”
Download your copy of The Renewed Lease of Life here.
Read other recent UK Manufacturing news: https://uk-manufacturing-online.co.uk/category/news/
