Why ESG Compliance Will Shape West Midlands Manufacturers’ Strategy in 2026

Takeaways

• West Midlands manufacturers are set to prioritize ESG compliance, sustainability, and skills investment in 2026.
• Managing cashflow and working capital pressure remains a key concern for boards, lenders, and investors.
• Regulatory, geopolitical, and operational resilience are shaping manufacturing strategies for the year ahead.

Manufacturers across the West Midlands are expected to sharpen their focus on ESG compliance, sustainability, and cashflow management in 2026, according to a newly published industry report.

The findings come from the latest Manufacturing Agenda report released by business advisory firm FRP, which surveyed senior decision-makers across the region. The report shows that more than a quarter (29 per cent) of respondents expect boardroom discussions in 2026 to centre on sustainability and environmental, social, and corporate governance (ESG) compliance.

Alongside ESG, financial discipline remains high on the agenda. Around 28 per cent of executives said managing cashflow or working capital pressure would be a priority, while 27 per cent highlighted the need to navigate new regulatory risks. A similar proportion pointed to geopolitical uncertainty as an ongoing challenge for the manufacturing sector.

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These priorities reflect the pressures manufacturers faced over the past year. According to the report, firms spent much of 2025 dealing with geopolitical friction or trade changes (34 per cent), margin squeezes and unplanned cost spikes (32 per cent), and the sudden loss of key orders or customers (29 per cent). Together, these challenges have pushed boards to take a more structured and forward-looking approach as they plan for 2026.

In response, West Midlands manufacturers are planning fresh investments aimed at strengthening long-term resilience. Skills and talent development tops the list, with 41 per cent of businesses prioritizing spending in this area. Sustainability, ESG compliance, and decarbonization initiatives follow closely, cited by 36 per cent of respondents. The report notes that these investments are increasingly seen as essential rather than optional, particularly as regulatory expectations continue to evolve.

FRP said lenders and investors broadly share the same focus areas as manufacturing boards. When asked what might prompt them to intervene in a portfolio company over the next 12 months, lenders and investors most commonly cited cost, cashflow, and working capital issues (44 per cent). Investment, automation, and digital execution were also key triggers (41 per cent), followed by concerns around leadership resilience (37 per cent).

Commenting on the findings, Raj Mittal, restructuring advisory partner at FRP in Birmingham, said manufacturing teams in the region are preparing to address deeper, structural challenges.

“West Midlands manufacturing management teams are gearing up to tackle major, structural challenges, like ESG compliance, that will help them build lasting value,” he said. “This reflects the fact that manufacturing resilience is no longer purely defined by financial strength - it's about the ability to identify and proactively meet capability gaps and staying abreast of ever-evolving regulation.”

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Mittal added that as firms move into the new year, understanding the lender perspective will be critical. He noted that a stronger focus on working capital and cashflow management is likely to improve access to finance and support ambitious growth plans across the sector.

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Source: Express & Star