UK manufacturing activity has shown fresh signs of life, with recent PMI data reaching its highest level in months and business confidence beginning to improve. According to figures reported this week by The Guardian output and export orders have strengthened, offering a welcome boost to sentiment across the sector.
However, business leaders are being warned that positive economic signals do not automatically translate into sustainable growth plans, particularly for small and mid-sized businesses operating under continued cost pressure.
According to Michael Gould, founder of business planning platform Kaleidoscope.com, headline indicators such as PMI can create a false sense of security if they are not interpreted carefully.
“Economic indicators are useful signals, but they are not a business plan,” Gould says. “A single positive PMI reading doesn’t mean the planning deficit in UK SMEs has disappeared. Growth signals are welcome, but without clear rolling forecasts and stress-tested plans, many firms risk making decisions on hope rather than insight.”
While confidence is improving, many of the pressures that have shaped the last two years remain firmly in place. Inflation is still running at around 3.4%, wage expectations continue to rise, and businesses are juggling higher energy, logistics and financing costs alongside fragile margins.
“This is exactly the moment when planning discipline is most at risk,” Gould says. “When sentiment turns positive, businesses often feel pressure to move quickly, to hire, to invest, to commit, without fully testing whether those decisions still hold up if conditions shift again.”
He warns that SMEs frequently mistake short-term momentum for long-term stability, particularly when relying on static annual budgets that struggle to cope with volatility.
“Traditional budgeting assumes a relatively predictable environment,” Gould says. “That assumption hasn’t held true for a long time. Many leaders are still working with plans that were never designed to flex, which makes them vulnerable when costs move or demand softens.”
Rather than reacting immediately to improved sentiment, Gould believes businesses should focus on translating pockets of growth into decisions that remain viable under different scenarios.
“Growth should be treated as a possibility, not a promise,” he says. “The question leaders need to ask isn’t ‘what if this continues?’, but ‘what if it doesn’t?’ Planning for more than one outcome is no longer a luxury, it’s basic risk management.”
He adds that hiring and investment decisions, in particular, require careful alignment with cash flow and margin resilience.
“Confidence doesn’t automatically equal capacity,” Gould says. “You can have strong demand signals and still overstretch if costs rise faster than expected. The businesses that struggle are often the ones that expand based on optimism rather than tested assumptions.”
Gould also highlights the importance of shared understanding at leadership level, especially during periods of change.
“Different teams often interpret the same data in different ways,” he says. “If those assumptions aren’t aligned, businesses can find themselves making inconsistent decisions just as they scale up.”
Looking ahead, Gould believes the next phase for UK manufacturers and growth-focused SMEs is less about chasing momentum and more about strengthening decision-making foundations.
“Recovery is welcome, but it’s not certain,” he says. “The strongest businesses coming out of this period won’t be the ones that reacted fastest to good news. They’ll be the ones that paused, tested their assumptions, and built plans that still worked when conditions inevitably changed again.”
