UK growth improves, but electronics manufacturers face a tougher investment outlook

The UK economy is expected to grow faster than previously forecast this year, but the improvement comes with a warning about the cost of doing business in 2027.

The International Monetary Fund now expects UK growth of 1.3% in 2026, up from 1.0% in July, followed by 1.2% in 2027. Its assessment points to higher energy prices and long-term interest rates weighing on consumption and investment.

“Higher energy prices and long-term interest rates (will) weigh on consumption and investment,” the IMF said in its UK assessment, as reported by Reuters.

For electronics manufacturers, those pressures meet at the factory investment decision: the cost of running existing equipment and the cost of financing its replacement. A stronger national growth figure does not establish whether a contract manufacturer’s customers are increasing orders or postponing a product launch.

Energy costs arrive on different schedules

The latest figures from the Department for Energy Security and Net Zero show that manufacturing businesses paid an average of 17.4 pence per kWh for electricity in the second quarter of 2026, excluding the Climate Change Levy. That was 4.0% higher than a year earlier. The figures are provisional and cover manufacturing broadly, rather than electronics alone.

Those averages also hide differences between businesses. The department explains that many non-domestic customers use fixed-price contracts renewed at different times. Wholesale price movements therefore reach their bills unevenly.

In electronics production, electricity supports assembly, inspection and test equipment, as well as services such as extraction and building systems. The exposure depends on the processes a business runs and its energy contract. A board assembler and a semiconductor fabrication facility should not be treated as having the same cost structure.

That distinction matters when comparing suppliers’ quotations. A national price average provides context; it cannot identify the energy cost within a particular assembly price or demonstrate that a supplier’s increase is entirely energy-related.

The investment case has two costs

Replacing equipment can reduce operating costs or increase throughput, but it also requires funding. A new assembly line, automated inspection system or test platform has an upfront cost, installation work and a period before the expected benefit is realised.

The IMF’s warning about investment is therefore relevant to the economics of an upgrade. Higher financing costs can make a project harder to justify even when the proposed equipment uses less energy or reduces manual work. The outcome depends on utilisation, financing terms and the savings the business can actually achieve.

This is an implication of the economic outlook, rather than evidence that electronics companies have already cancelled investment. Neither the UK growth forecast nor the broad manufacturing energy statistics measure electronics capital expenditure.

There is also a more uneven demand story behind the headline. Reuters’ coverage of the wider IMF outlook identifies strong AI infrastructure investment as a contributor to global growth, including benefits for countries supplying AI hardware. That does not imply the same demand conditions for every industrial, automotive or consumer-electronics supplier.

For a UK electronics business planning capacity, the useful comparison is between its own customer commitments, equipment utilisation and contract costs. The next question is whether investment in the markets it serves is turning into confirmed production work, and whether that work supports the cost of expanding.

Sources

BBC: UK growth forecast upgraded but energy prices and rates to hit in 2027; Reuters: UK growth and investment outlook; Reuters: AI investment and the global outlook; DESNZ: Quarterly Energy Prices, September 2026.