A COLLAPSE in domestic orders is affecting manufacturers on top of rapidly rising costs, according to a new report.

Make UK said its research suggested that the sector started the year on a “fragile” footing.

The situation is likely to be worsened by higher oil prices and Middle East tensions, which will combine to weigh on growth and business confidence, the manufacturing group warned.

Its research among more than 200 companies suggested that the sector is set to grow by 0.9 per cent in 2026, a slight rebound after contracting by 0.2 per cent in 2025, but the outlook was described as “precarious.”

Make UK senior economist Fhaheen Khan said: “UK manufacturers have started 2026 on a fragile footing.

“While output and investment show some improvement after a challenging end to last year, rising costs and weakening domestic demand are creating real pressures for businesses.

“With UK industrial energy costs among the highest in the developed world, any sustained increase in oil and gas prices could quickly push up input costs, squeezing margins and limiting investment.”

The report said UK orders had dropped sharply in recent months, suggesting domestic demand has “collapsed.”