The latest Enginuity SME Snapshot (March 2026) paints a clear picture of the pressures facing engineering and manufacturing SMEs, while also highlighting signs of growing confidence and investment across the sector. Key findings from the report were previewed at the CEA Members’ Forum on 25 March 2026, ahead of its official launch, and strongly reflected the experiences of members in the room.
This latest snapshot builds on Enginuity’s first SME survey published in July 2025, with participation increasing from 135 to more than 252 SMEs, representing over 10,000 employees and £1.19 billion in sales. The initial report gained traction across 62 publications, reaching an audience of around 500,000, and has been used to inform discussions with policymakers, including the Department for Business and Trade, Skills England and the Department for Education.
Business confidence has improved since the previous survey, with 53% of SMEs saying they are optimistic about the year ahead. There are also signs of increased investment, particularly in plant, machinery and technology, as businesses look to improve productivity in response to rising costs. Around 69% of SMEs say they are focusing on productivity improvements as a way of offsetting cost pressures.
However, these improvements are not yet translating into easier trading conditions. Around 76% of SMEs report that they are still operating below full capacity. Only 17% consider the UK an attractive place to invest and do business, while 52% describe the labour market as difficult.
Recruitment remains one of the most immediate challenges. While 60% of SMEs attempted to recruit in the last six months, 80% of those reported difficulties in finding suitable candidates. The issue is not simply availability, but suitability. Around 60% of businesses cite a lack of candidates with appropriate technical qualifications as the main driver of skills gaps, while 40% point to a lack of employability skills such as communication, teamwork and problem-solving.
Labour costs continue to put real pressure on businesses. For most SMEs, they remain the single biggest factor driving price increases, alongside continued rises in energy, materials and utilities. In response, companies are focusing on improving productivity, holding back on recruitment, and increasing investment in automation.
The report also raises questions about the effectiveness of current policy measures. There is no evidence that the Autumn 2025 Budget announcement of fully funded apprenticeship training for under-25s in SMEs is incentivising greater uptake. A third of businesses say it will not change their approach, while others expect to reduce apprentice hiring or do not currently employ apprentices at all.
At the same time, ongoing changes to the skills system are creating uncertainty for SMEs, many of which already find the landscape difficult to navigate. While there is support for improving access to skills and training, businesses are clear that the system must be simpler, more practical and aligned with how employers actually operate.
Commenting on the survey findings, Viki Bell, CEO of CEA (Construction Equipment Association), said:
“This reflects exactly what we are hearing from CEA members, many of whom contributed to this survey. There is a clear willingness across the sector to invest, grow and bring new people into the industry, but businesses continue to be held back by a shortage of the right skills and the rising cost of employment.
What this report highlights is the gap between policy and what is happening on the ground. Employers need a skills system that is simpler to navigate, more responsive to demand and better aligned with how businesses actually operate.
If we are serious about supporting growth across engineering and construction, we need to make it easier for SMEs to recruit, train and retain skilled people. Without that, these challenges will continue to limit productivity and hold back progress.”
The overall message is clear. SMEs are ready to invest and grow, but progress on skills and addressing cost pressures will be key to turning that intent into long-term growth
For businesses looking to strengthen their approach to apprenticeships and workforce development, Enginuity offers a range of support, tools and guidance tailored to engineering and manufacturing SMEs. https://enginuity.org/tools-and-resources
You can read the full Enginuity SME Snapshot report here: SME Snapshot Report | Skills policy | Enginuity
Watch the launch webinar for the SME Snapshot Report 2026 here: https://youtu.be/52AQLHnrVNY?si=_Aa_r0kyAUem0wYk