Manufacturing small businesses maintain resilient growth focus on the EU, despite Brexit challenges

More than a third of small businesses in the manufacturing sector (34%) are targeting growth opportunities in overseas markets beyond the UK – and the sector has the strongest focus on Europe, according to new research from Novuna Business Finance.

Recent sector growth forecasts

2025 so far has seen a fall in the percentage of manufacturing small businesses predicting growth each quarter. After a record low-point in Q2, there have been signs of modest recovery, but overall, growth forecasts remain significantly down on last year.

Overseas growth outlook

Despite the challenges faced, the longer-term picture shows that enterprises in the sector continually look for innovative ways to open  new growth opportunities, and as part of this, at least four in five small business owners have been looking for new markets to open up and expand into.

Of those manufacturing enterprises looking to expand into new markets, 34% targeted overseas markets outside the UK. For manufacturing, this is twice the national average of 16%. Manufacturing businesses have maintained a focus on the EU market, while interest has fallen across other UK industry sectors.

Since 2020, manufacturing presents a picture of remarkable consistency, with just over two thirds of small business owners looking for domestic growth opportunities within the UK market and just over a third maintaining a focus on EU countries. Given the seismic shockwaves of Brexit, Covid lockdowns and then the cost-of-living crisis, the consistency of focus on the UK and EU markets from manufacturing enterprises is impressive. It also underscores that despite the immense market challenges and faltering sector growth predictions during 2025, manufacturing enterprises are resolute in their ambition to invest in future growth opportunities. 

Europe beyond the EU

Mirroring continued interest in – or the need to trade with the EU, manufacturing small businesses were also the sector most likely to also want to open new market opportunities with European countries outside the EU – countries such as Switzerland, Norway, Iceland, Liechtenstein, Andorra, Bosnia and Herzegovina, Albania, Serbia, Montenegro and Armenia. For the manufacturing sector, the percentage of enterprises that wanted to open up new opportunities with non-EU European countries was double the national average for UK small businesses (12% V 6%).  Whilst the percentage is lower than EU countries, the findings underline the continued importance of the EU to UK manufacturing despite the red tape, cost and logistical challenges since Brexit.

USA falls

At the start of 2025, our research indicated small businesses were worried about the possible impact of the new US administration on trade for UK enterprises. Key concerns included the prospect of:

·      Tariffs on UK exports to the USA – 43%

·      Increased market volatility that impacts UK growth forecasts and interest rates – 33%

·      Weakening of the UK’s special relationship with the UK – 30%

·      The UK finding itself isolated – outside the EU and no longer close to the USA – 29%

2025 has so far seen fewer manufacturing small businesses predict growth opportunities in the US market. Set against sustained manufacturing interest in the EU market, there has been a sharp fall in the percentage of UK small businesses looking to open up markets in the USA. Interest in trade peaked before Covid, and since the pandemic, has fallen from 45% to 17%. Whilst 43% of small businesses feared the impact of US trade tariffs at the start of 2025, the sliding interest in doing trade with the USA started long before that. 

Other markets for trade

For manufacturing small businesses, there was low-level interest in securing growth opportunities in India and Southern Asia (5%), North Africa (5%) or China (2%). When it came to Australia and New Zealand, manufacturing was the third most likely sector to be looking at this market – behind IT/telecoms and retail – although interest levels have halved over the last five years.

Jo Morris, Head of Insight at Novuna Business Finance comments: “After the surge in small business confidence this time last year, there has been a slide in the percentage of business owners predicting growth for the last four quarters – and enterprises in the manufacturing sector have had a particularly challenging time. Many have tried to offset these sobering short-term growth forecasts by working on new projects to unlock future growth – and opening new markets overseas is particularly important to manufacturing businesses. What is clear from our research is the majority are not looking to open up new markets around the world, they continue to focus on the importance of Europe and particularly the EU countries. With the UK Government committed to a growth agenda, manufacturing enterprises clearly would like it to be simpler, faster and more cost-efficient to solidify their trading relationships in key EU markets.”