TL;DR

Eight in ten UK manufacturers surveyed for Crowe’s latest Manufacturing Outlook Report have adopted AI or are actively trialling it, Greater Birmingham Chambers of Commerce reported on Friday 9 October. That compares with 52% in Crowe’s spring 2025 survey. Crowe ran the survey with the CBM, the Confederation of British Metalforming, and found 72% of firms are working in defence manufacturing or looking into it.

AI moves into the mainstream

The jump in adoption is the headline figure, though the published findings do not say how deeply firms are using the technology. One manufacturer quoted on Crowe’s report page gives a flavour. Geoff Archenhold, chief executive of Integrated System Technologies, says his team can “now iterate concepts, evaluate designs and generate test code in hours rather than years”, while stressing the adoption “was measured, not assumed”.

Paul Cox, a corporate tax partner at Crowe, suggests manufacturers investing in AI and automation look again at R&D tax relief, which 37% say they have successfully claimed.

Defence as a growth route

Crowe sees defence as an opening for suppliers with the capacity, technical skills and compliance standards to serve it, including those exposed to pressure on the UK car industry. Sam Baynham of ConeX Portal, quoted by Crowe, says the question for SMEs is how to get in, and that practical routes for non-traditional suppliers are needed.

The same old barriers

For 57% of respondents, the largest brake on growth is higher operating costs, with wages, employer National Insurance and energy bills squeezing margins. Some 62% name a lack of skills as their toughest recruitment issue, down slightly from 64% in the spring edition, and Crowe warns of a succession gap as experienced engineers near retirement.

According to the chamber’s write-up, funding has shifted sharply too: 43% now pay for growth from their own cash reserves, against 82% in spring 2026. Openness to reshoring has eased to 71% from 98%, while 65% have had customers ask about their carbon footprint or energy efficiency.

Looking forward

The adoption figure is striking, but adoption here includes trials. In our view, the more telling number for policymakers is the 57% citing operating costs: while margins stay squeezed, turning AI trials into everyday production has to compete with every other investment. Midlands manufacturers, Crowe’s Hayley Lavery argues, are well placed for these opportunities; whether they can afford to chase defence work and AI at the same time is the open question.