Most engineering SMEs plan to raise prices, survey finds

BusinessUpdated 5 October 2026

Nearly 80 per cent of UK engineering and manufacturing SMEs surveyed by the skills charity Enginuity are under pressure to raise prices because of rising labour and raw material costs. Enginuity says almost three quarters now plan to pass those costs to customers, which the charity describes as a first for its survey. Enginuity also says two thirds are not operating at full capacity.

TL;DR · LAST REVIEWED Nearly 80 per cent of UK engineering and manufacturing SMEs surveyed by the skills charity Enginuity are under pressure to raise prices because of rising labour and raw material costs. Enginuity says almost three quarters now plan to pass those costs to customers, which the charity describes as a first for its survey. Enginuity also says two thirds are not operating at full capacity.

Enginuity says nearly 80 per cent of surveyed UK engineering and manufacturing SMEs are under pressure to raise prices because of rising labour and raw material costs.
Enginuity says almost three quarters plan to pass costs to customers, which the charity describes as a first for its snapshot survey.
Enginuity says two thirds are not operating at full capacity, for the second consecutive year.
Enginuity has not published the number of respondents for this wave; its March 2026 snapshot drew on 250 SMEs.

KEY FACTS

The headline finding: Nearly 80 per cent of the UK SMEs surveyed by the skills charity Enginuity say they are under pressure to raise prices because of rising labour and raw material costs
What is new this time: Enginuity says that for the first time since it began the snapshot survey, most respondents, almost three quarters, plan to pass those costs on to customers
Spare capacity: Two thirds of the SMEs surveyed are not operating at full capacity, the second consecutive year the survey has found this
Confidence: Fewer than 40 per cent reported confidence in the next three to five years, with financial constraints cited as the biggest barrier to investing in skills
The cost of the skills gap: Enginuity's separate Mind the Gap report, published in June 2026, estimated that skills-related challenges cost UK engineering and manufacturing around 5.2 billion pounds a year
What Enginuity wants: Chief executive Ann Watson has called on the Chancellor to make it affordable for SMEs to take on extra staff ahead of the Budget

What the survey found

Enginuity, a charity whose stated purpose is helping to close the skills gap in UK engineering and manufacturing, has published findings from its latest SME Snapshot. The charity says the results show cost pressure across the sector and a weakening outlook among the small and medium sized businesses it surveyed. Every figure below is attributed to Enginuity.

Finding	Figure
Under pressure to raise prices	Nearly 80 per cent, according to Enginuity
Plan to pass costs to customers	Almost three quarters, according to Enginuity
Not operating at full capacity	Two thirds, according to Enginuity
Confident about the next three to five years	Fewer than 40 per cent, according to Enginuity
Do not fully understand available government skills support	Almost two thirds, according to Enginuity
Believe the new apprenticeship units will address current skills gaps	10 per cent, according to Enginuity

Enginuity has not published the number of respondents for this wave of the survey. That absence matters, because percentages without a sample size cannot be weighed: a finding of nearly 80 per cent means something different across 50 businesses than across 500. For context, Enginuity's previous snapshot, published in March 2026, drew on 250 SMEs representing more than 10,000 employees and 1.91 billion pounds in combined revenue. An earlier wave, in July 2025, had 135 participating businesses. Neither figure can be assumed to apply to the current release.

Enginuity also says financial constraints remain the most significant barrier to investing in skills development, and that almost two thirds of SMEs do not fully understand the available government support for skills. On the new apprenticeship units, only 10 per cent of those surveyed believe the units will effectively address current skills gaps. Ann Watson MBE, chief executive of Enginuity, said SMEs are telling the charity that they are at their limit and cannot hold back prices any longer, while at the same time they are not able to achieve maximum production.

Why the pricing finding matters

The pricing result is the substance of the release. A firm that absorbs cost increases protects its customers but squeezes its own margin. A firm that passes them on protects its margin but feeds the increase through to prices further down the chain. Enginuity's point is that the balance has tipped: the charity says that for the first time since the snapshot survey was instigated, most SMEs, almost three quarters, plan to offset rising costs by passing them on to customers. That is a change in behaviour as Enginuity reports it, not a statement about the wider economy.

Context matters here. Engineering and manufacturing SMEs largely sell to other businesses rather than to consumers, so any effect on shop prices is indirect and slower than a retail cost rise. A component maker that raises prices affects the next firm in the chain, which may absorb the increase, pass it on in turn, or renegotiate. The lag between a cost increase at the bottom of a supply chain and a change on a shelf can run to months, and it can also disappear entirely if demand is weak enough that firms cannot make the increase stick. No estimate of the size of any such effect is offered by Enginuity, and none should be inferred from the percentages alone.

The capacity finding sits alongside the pricing one. Enginuity says two thirds of SMEs are not operating at full capacity, for the second consecutive year. Watson said SMEs are telling Enginuity that they are at their limit and cannot hold back prices any longer, while at the same time they are not able to achieve maximum production. Read together, the two findings describe firms under cost pressure that are also unable to run at full output, which is a harder position than either finding suggests on its own. Enginuity attributes both to the businesses it surveyed.

The stagflation claim

Enginuity's release frames the findings as triggering stagflation fears. Stagflation describes a period of weak or stalled economic growth occurring alongside rising inflation. That is the charity's framing of its own survey results, and it should be reported as such rather than adopted as a description of the UK economy.

The term is contested. Stagflation has no single agreed statistical definition, and economists disagree about the thresholds at which weak growth plus rising prices becomes stagflation rather than simply a difficult patch. More fundamentally, a survey of one sector cannot establish an economy-wide condition. Engineering and manufacturing SMEs are a significant part of UK output, but they are not the whole economy, and a sentiment survey records what businesses say they expect and intend, not what has happened in the national accounts. Confidence readings and pricing intentions can diverge sharply from realised outcomes.

The authoritative measures are published elsewhere. The Office for National Statistics publishes the UK consumer price inflation statistics, which give the official inflation reading, and the Bank of England publishes the Monetary Policy Report, which sets out the Bank's assessment of growth and inflation together. Readers who want to judge whether stagflation conditions exist should look to those two sources rather than to a single sector survey. Enginuity's release does not claim to measure either growth or inflation directly.

The skills gap behind it

The pricing and capacity findings sit on top of a longer-running skills problem that Enginuity has documented separately. Enginuity's Mind the Gap report, published in June 2026, was commissioned by Enginuity and delivered by SQW in collaboration with Oxford Innovation Advice and Qa Research. It estimated that skills-related challenges cost the engineering and manufacturing sector approximately 5.2 billion pounds per year. SQW and Enginuity state that this is equivalent to around 2 per cent of annual sector output.

A correction is needed on a figure that has appeared in some coverage. The 10 per cent figure refers to the loss at an individual affected business, around 110,000 pounds of its gross value added annually, not to the sector as a whole. Mind the Gap found that affected individual businesses can lose as much as 10 per cent of their gross value added, roughly 110,000 pounds annually. That is a per-firm figure. The sector-wide figure, as stated by SQW and Enginuity, is the 5.2 billion pounds, around 2 per cent of annual sector output. The two numbers measure different things and should not be conflated.

Mind the Gap also found that around half of surveyed engineering and manufacturing SMEs reported experiencing skills gaps or skills shortages. That finding connects to the snapshot results on government support and apprenticeship units: Enginuity says almost two thirds of SMEs do not fully understand the available government support for skills, and only 10 per cent believe the new apprenticeship units will effectively address current skills gaps. Enginuity also says financial constraints remain the most significant barrier to investing in skills development, which links the skills picture back to the cost pressure at the centre of the snapshot.

What happens next

Two policy processes are in play. The Milburn Commission is due to deliver findings on young people not in education, employment or training. Watson said that with employer confidence in recruitment persistently lagging their confidence in training, Alan Milburn's final recommendations must consider what is holding employers back from recruiting. Separately, the government has announced an extension of work experience and skills training to 14 to 16 year olds alongside curriculum changes and new vocational qualifications. Neither process has reported final outcomes.

Watson has called on the Chancellor to make it affordable for SMEs to recruit. She said the Chancellor needs to take heed as he prepares for the Budget and find a way of ensuring that small and medium sized enterprises, which make up more than 90 per cent of the manufacturing sector, can afford to take on extra personnel. That is a call from the charity's chief executive, not a statement of what the Budget will contain. No prediction is offered here about Budget measures, and none should be read into the survey findings.

The Budget is the next fixed point at which any of this could change. Readers who want to know what is actually announced should look to the published Budget documents rather than to pre-Budget briefing, which is frequently overtaken by the final text. In the meantime, the Enginuity snapshot stands as the charity's own reading of its sector, based on a sample size it has not disclosed for this wave, and the Mind the Gap report stands as its fuller assessment of the skills cost. Both are Enginuity's findings, published by Enginuity, and should be weighed as such.

Source: Enginuity: Mind the Gap report.

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DISCLAIMER

The survey findings reported here are Enginuity's own, released to press on 5 October 2026. Enginuity is a skills charity for the engineering and manufacturing sector and the survey covers businesses in that sector. The number of businesses responding to this wave was not stated in the release. Figures have not been independently verified by Kael Tripton. This is not business or investment advice.

Frequently asked questions

How many businesses did Enginuity survey for this snapshot?

Enginuity has not published the number of respondents for this wave. Its previous snapshot, published in March 2026, drew on 250 SMEs representing more than 10,000 employees and 1.91 billion pounds in combined revenue. An earlier wave in July 2025 had 135 participating businesses. Without a sample size for the current release, the percentages cannot be weighed against the earlier waves.

What does Enginuity say about price rises?

Enginuity says nearly 80 per cent of the UK SMEs it surveyed are under pressure to increase prices due to escalating costs of labour and raw material. The charity says that for the first time since the snapshot survey was instigated, most SMEs, almost three quarters, plan to offset rising costs by passing them on to customers.

Is the UK in stagflation?

Enginuity's release frames its findings as triggering stagflation fears. Stagflation describes a period of weak or stalled economic growth occurring alongside rising inflation, and it has no single agreed statistical definition. A survey of one sector cannot establish an economy-wide condition. The authoritative measures are the ONS consumer price inflation statistics and the Bank of England's Monetary Policy Report.

What is the 10 per cent figure in the Mind the Gap report?

It refers to the loss at an individual affected business, around 110,000 pounds of its gross value added annually, not to the sector as a whole. The sector-wide figure, as stated by SQW and Enginuity, is approximately 5.2 billion pounds per year, equivalent to around 2 per cent of annual sector output.

What did Mind the Gap find about skills gaps?

Enginuity's Mind the Gap report, published in June 2026 and delivered by SQW in collaboration with Oxford Innovation Advice and Qa Research, found that around half of surveyed engineering and manufacturing SMEs reported experiencing skills gaps or skills shortages. It estimated that skills-related challenges cost the sector approximately 5.2 billion pounds per year.

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