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Focus on Artificial intelligence

A very warm welcome to the first instalment of the ERA Foundation’s Industry Insights newsletter where, each month, we’ll be bringing you expert opinions on the key themes driving the sector. In our first edition we explore three defining forces reshaping manufacturing: the rise of artificial intelligence, mounting energy costs and a growing shortage of skilled talent.

The ERA Foundation
May 2026 4 min read

Before we get into the most prominent topics of this month, we must highlight the positive start the UK manufacturing sector had to the second quarter of the year. The seasonally adjusted S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) rose to a 47-month high of 53.7 in April, its best level since May 2022 and little-changed from the earlier flash estimate of 53.6. The headline PMI has posted above its neutral 50.0 mark – signalling expansion – for six successive months. 

Although UK manufacturing is experiencing its strongest growth and job expansion in nearly four years, the rebound is being threatened by severe supply chain delays and spiking input costs linked to Middle East conflict and rising domestic expenses. 

Now, continuing with our first topic: Artificial intelligence is undoubtedly one of the biggest drivers of change in the sector. Of course, it’s not a newcomer to the manufacturing landscape but there’s no doubt that the last 12 months has seen a shift – experimentation has given way to expectation, ambition has shifted to delivery, and potential has yielded to proof.

Adoption across manufacturing is accelerating, with three key areas emerging. First, AI is streamlining back-office functions such as finance, payroll and administrative processes. While this isn’t unique to manufacturing, it is helping firms reduce costs and improve efficiency at scale.

More transformative, however, is AI’s growing role on the shop floor. Manufacturers are increasingly using AI to predict equipment failures, optimise maintenance schedules and connect production systems in real time. The result is improved productivity and reduced downtime.

A third, newer application lies in compliance. In highly regulated industries, businesses are exploring AI as a way to accelerate certification processes. If successful, this could significantly reduce the time it takes to bring new products to market if the hurdle of regulatory acceptance can be overcome.

With this in mind the UK government has appointed the High Value Manufacturing (HVM) Catapult’s Chief Technology Officer, Professor Chris Dungey, to the role of national AI Champion to accelerate adoption of AI across industry and boost productivity and growth.

Supported by a team of HVM Catapult specialists and a steering board of government and industry representatives, Chris’s mission is to turn the UK’s industrial AI potential into widespread practical adoption. Find out how here: https://www.themanufacturer.com/articles/meet-manufacturings-new-ai-champion-professor-chris-dungey/

But national strategy is one thing – what’s happening on your shop floor is what matters. How has your business responded to the rise of AI and what does implementation look like in your facility right now?

It’s clear that digital adoption is no longer just about a competitive differentiator; it’s increasingly about survival, particularly in the face of soaring energy costs.

Energy has become a critical pressure point for UK manufacturers. Industrial energy prices are among the highest in the world, driven not only by wholesale costs but also by layers of policy complexity. For energy-intensive sectors, this creates a severe competitive disadvantage compared to countries like Germany and the US.

For SMEs in particular, the situation is acute. Some have faced energy price increases of three to four times previous levels, forcing difficult decisions about scaling back operations. Find out how high energy costs are threatening to UK manufacturing competitiveness: https://www.themanufacturer.com/articles/how-high-energy-costs-are-threatening-to-uk-manufacturing-competitiveness/

Ironically, this challenge is also accelerating digital transformation. Manufacturers that invest in digital technologies often achieve significant energy savings – sometimes reducing consumption by nearly half. As a result, energy efficiency is becoming a major driver of innovation, alongside productivity and cost reduction.

Every manufacturer is tackling this talent cliff differently. What specific steps has your team taken to manage the skills shortage this year? Are you changing how you train, how you recruit, or are you turning to automation?

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