South East leads UK manufacturing SME performance

Small and medium businesses (SMEs) account for 99% of UK manufacturing but vary significantly in profitability, supply chain performance and growth potential across regions, according to new research from enterprise software company Unleashed.

The company’s UK Regional Manufacturing Report analysed Q1 2026 operational data from 1,322 manufacturing businesses using Unleashed’s software. It assessed sales revenue, supplier lead times, gross profit margins, stock on hand and purchasing costs. The company benchmarked performance against 12 consecutive quarters of historical data between Q2 2023 and Q1 2026.

Across the UK, SME manufacturers generated average sales revenue of £484,626 during the quarter, with an average gross profit margin of 33%. Average supplier lead time stood at just under 26 days.

However, the national figures disguise substantial differences between regions.

Regional ranking of UK manufacturing SMEs

South East leads for manufacturing performance

The South East topped Unleashed’s regional manufacturing index with a score of 70.31 out of 100.

Manufacturers in the region recorded an average profit margin of 38%, the highest in the UK, despite sales revenue of £488,030, which was close to the national average.

The region also had relatively lean stock holdings, averaging £143,122.

Scotland ranked second with an index score of 66.87. Manufacturers there recorded an average margin of 35%, while supplier lead times averaged 22.49 days.

The West Midlands came third, scoring 63.70. Its manufacturers achieved a 36% margin despite relatively low average revenue of £410,998. Supplier lead times averaged 19.52 days, the fastest among the regions highlighted by Unleashed.

“Regional disparities aren’t always obvious when you look at the UK’s manufacturing health as a whole – but they are an important barometer for both policymakers as well as manufacturers looking to start or expand a business,” said Joe Llewellyn, General Manager of ERP Small Business Division at The Access Group in Unleashed’s report.

Llewellyn added that the results challenged assumptions about some parts of the country.

“It’s perhaps surprising that the South-East came top for profitability, given that costs tend to be higher. But it’s a sign that firms in the region have a tight handle on their operations, successfully converting the revenue they generate into profits,” he said.

High manufacturing revenues do not guarantee strong margins

At the other end of the index, Unleashed found that high sales did not always translate into profitability.

Northern Ireland recorded the highest average sales revenue of any UK region at £657,164, but its manufacturers retained only 25p for every pound of revenue, the lowest margin in the study.

The North West showed a similar pattern. Average revenue reached £635,487, the third highest figure, but its average margin was 28%.

The North East recorded an average margin of 34%, close to the national figure, but Unleashed highlighted considerable historical volatility. Margins in the region have ranged between 30% and 44% over the past three years.

Aerospace and advanced engineering offer growth opportunities

The research also points to opportunities for Britain’s advanced manufacturing sector, particularly in the Midlands.

Gareth Johnston, Operations Director at BGB, said demand for specialist engineering products is growing.

“We’re seeing major growth opportunities in advanced manufacturing and engineering,” he said. “This includes long-term demand for high-performance slip rings and rotary unions, particularly for aerospace technologies like drones and radar.”

However, Johnston said manufacturers also face challenges from international trade, recruitment and costs.

“While the Midlands remains a precision engineering hub, global export complexities are a challenge, since international trade drives over 90% of our turnover,” Johnston said. “Recruitment is tough, particularly finding specific technical expertise, and rising material costs and changing EU and global regulations also require vigilance.”

BGB is responding by investing in apprenticeships and partnerships with educational institutions, as well as expanding its testing capabilities. Johnston said the company had installed climatic chambers capable of simulating extreme environments to improve component reliability for international customers.

The 10 English towns and cities best poised for manufacturing growth

Unleashed separately ranked the top 10 English towns and cities that could offer the greatest potential for future manufacturing growth as supported by infrastructure, workforce size, and local connectivity. Its emerging manufacturing city index uses publicly available data.

Stoke leads emerging manufacturing locations

Stoke-on-Trent ranked first with a score of 64.24. It has 610 manufacturing units, a manufacturing workforce of 13,000 and average broadband download speeds of 164 Mbps.

Leeds ranked second at 63.90, followed by Birmingham at 60.89. Birmingham has the largest existing manufacturing base among the emerging locations studied, with 2,105 manufacturing units and a workforce of 28,000.

“Stoke, which has seen its traditional industries disappear, is currently showing the most potential for growth,” Llewellyn noted, adding: “Whatever region they operate in, SMEs have the advantage of speed and agility, especially if their decisions are driven by real-time stock, sales and financial data.”

Infrastructure shapes manufacturing investment

The research also suggests that decisions over where to expand manufacturing operations are becoming more complex.

Phil Mason, Director of Business Consulting at international engineering consultancy NIRAS, said manufacturers need to consider the infrastructure surrounding a potential site.

“Site selection rarely comes down to a single factor,” he said. “Labour, transport links and proximity to customers remain important, but manufacturers are also looking for locations with transferable labour skills to support future growth.”

Mason said manufacturers should also examine whether existing operations can produce more before committing capital to additional facilities.

“The best-performing manufacturers aren’t necessarily spending more; they’re making better investment decisions,” he said. “They’re asking whether they need more assets or whether they can unlock additional capacity, improve efficiency and remove constraints from the operations they already have.”