UK reindustrialisation investment set to fall sharply

Capgemini has published new research showing a sharp fall in planned UK reindustrialisation investment.

The report says the UK now leads globally in formal strategy, with 43% of organisations having a comprehensive plan in place, compared with 23% worldwide.

Its figures also point to a widening gap between planning and spending. Planned UK investment fell to USD $300 billion in 2026 from USD $650 billion in 2025, even as companies increased their focus on domestic production and sourcing.

Across Europe and the US, reindustrialisation has moved further into the mainstream. Some 73% of large organisations now have a strategy in place or in development, up from 59% in 2024, while planned investment over the next three years fell to nearly USD $2.5 trillion in 2026 from USD $4.7 trillion in 2025.

UK shift

In the UK, 85% of organisations cited the geopolitical environment as a key reason for shifting towards domestic sourcing and production. UK businesses are also placing greater weight on domestic than international investment, with a 63:37 split, compared with 58:42 in the US and 40:60 in Europe.

Investment patterns are changing as well. Reshoring investment among UK organisations rose to 44% in 2026 from 37% in 2025, while nearshoring fell to 40% from 46%, suggesting a stronger preference for bringing production back to the home market rather than moving it to nearby countries.

The broader international picture shows regional differences rather than a single approach. In continental Europe, friendshoring has become more prominent, with 64% of organisations citing it as part of their strategy. In the US, reshoring investment rose to 48% from 30%, while 42% continued to invest in nearshoring. In Europe, nearshoring fell from 55% to 39%, while reshoring increased from 34% to 42%.

The strongest shift is taking place in sectors with higher manufacturing intensity and strategic exposure, including automotive, electronics, semiconductors, and aerospace and defence. In these industries, supply-chain dependence, market access, and control over critical inputs are bigger concerns.

More selective

The research suggests companies are not abandoning reindustrialisation, but becoming more selective in how they deploy capital. Instead of pursuing large greenfield projects, organisations in non-critical sectors are increasingly turning to contract manufacturing, shared infrastructure, and multi-product manufacturing assets to retain control while limiting spending.

This shift appears linked to a broader reassessment of value. The report found that 86% of organisations now prioritise market access and supply-chain resilience in their reindustrialisation decisions, while nearly eight in ten expect economies of scale to lower unit costs over time.

Technology is also becoming more central to execution. Some 87% of organisations plan to invest in advanced manufacturing technologies, including artificial intelligence, automation, and digital twins, to help offset the higher costs of producing closer to end markets.

The report cites use cases including production planning and optimisation, supply-chain risk modelling, and location selection. These are areas where companies are seeking faster, better-informed decisions as they rework manufacturing footprints and supplier networks.

At the same time, it identifies a constraint that cuts across regions and sectors: skills. A large majority of respondents said talent shortages remain a barrier, particularly in advanced manufacturing engineering, automation, artificial intelligence, and digital technologies.

Michael Schulte, Chief Executive Officer of Capgemini Engineering and member of the Group Executive Board, said: "Amid heightened geopolitical and economic uncertainty, reindustrialization is entering a more mature phase - one that is clearly focused on resilience, sovereignty, and long‐term competitiveness. Today, the more established reindustrialization strategies are about building regionally balanced, technology‐enabled ecosystems that reduce critical dependency risks, coupled with a pragmatic approach to investment which is driving more flexible, capital-efficient models. With intent now clear, success will depend on delivery - anchoring decisions in long‐term value and building the digital and workforce foundations for durable industrial strength."

The survey covered 1,208 executives at organisations with annual revenue exceeding USD $1 billion, or USD $500 million in the defence sector, across the US, the UK, and continental Europe.