Q3: Energy, Water & Mining sector maintains upbeat sentiment.
- Business confidence in Energy, Water & Mining edged up to +11.4 from +10.5 in Q2, remaining ahead of its norm and well above the UK average.
- Annual domestic sales growth rebounded, and businesses in the sector expect the fastest expansion over the year ahead, but exports growth slowed sharply.
- Input and selling price inflation eased, though firms predict the sharpest price rises alongside strong profit growth over the coming year.
- Geopolitical risk remained the most widely cited growing challenge, while access to capital and government support were more widespread concerns than in any other sector.
- Employment and pay growth both softened, but companies plan to expand their headcount at the fastest pace next year.
- Capital investment growth eased but was the strongest of any sector, and businesses plan to accelerate growth further.
Business confidence in the Energy, Water & Mining sector
Business sentiment in Energy, Water & Mining improved slightly in Q3 2026, with the sector recording its third consecutive positive score. The Business Confidence Index for the sector rose from +10.5 in Q2 2026 to +11.4, widening the gap to the sector's historical average (+7.9) and outperforming the UK average (-0.5). Energy, Water & Mining was the second most confident sector in the UK, behind IT & Communications (+14.5).
Energy, Water & Mining businesses continue to report much higher levels of confidence than most other sectors in Q3 2026 amid upbeat expectations for sales, profits and investment for the year ahead. Elevated energy prices continued to support selling prices in the sector, with a further 4% rise in the Ofgem energy price cap from October, with energy suppliers anticipating a much larger uplift in Q1 2027. Geopolitical risk remained the most widely cited growing challenge amid renewed US-Iran hostilities towards the end of the survey period. Concerns about access to capital and government support were also more prevalent than in any other sector, although companies in Energy, Water & Mining remained less likely than average to cite many of the most common challenges facing UK businesses.
Domestic and export sales growth
Businesses in the Energy, Water & Mining sector reported a rebound in annual domestic sales growth to 4.4% in Q3 2026, climbing above both the UK average (3.6%) and the sector's historical norm (2.8%). While businesses across the UK lowered their domestic sales expectations this quarter, firms in the sector raised theirs to 5.9% over the next 12 months. This is the strongest projection of any sector and well above the 4.3% rise expected nationally.
In contrast, exports growth slowed sharply in the year to Q3 2026, with the sector recording its weakest rate since Q1 2025, at just to 1.4%. This sluggish increase was approximately half of both the national average (2.8%) and the sector's historical norm (2.9%). Businesses expect export sales growth to recover to 4.1% over the coming year, equalling the UK projection.
Selling and input prices, and profits growth
In line with the national trend, input price inflation in the Energy, Water & Mining sector eased in Q3 2026, dropping slightly below the 3.9% UK rate, to 3.7%. Businesses expect input price inflation of 3.6% over the next 12 months, the highest of any sector and above both the UK projection and the sector's historical norm (both 2.9%). This upward revision may partly reflect the jump in wholesale energy prices late in the survey period and should be treated with some caution.
Selling price inflation also slowed, to 3.1%, in the year to Q3 2026, but remained well above both the UK average and the sector's historical norm (both 2.2%), with only Transport & Storage (3.6%) reporting a faster increase. Companies in the sector expect to raise their prices by 3.0% over the coming year, the sharpest projected rise of any sector and significantly above the national average (2.1%).
Despite buoyant domestic sales and rising selling prices, annual profits growth in the Energy, Water & Mining sector eased to 2.6% in Q3 2026, below both the sector's historical norm (3.0%) and the national average (3.3%), possibly reflecting the sharp slowdown in exports. Companies are nevertheless optimistic, expecting profits growth to pick up to 6.1% over the coming year, their strongest expectation since Q2 2024 and well above the national average projection (4.5%).
Business challenges
With the conflict in the Middle East continuing to disrupt energy markets, geopolitical risk remained the most widely cited growing challenge in the Energy, Water & Mining sector in Q3 2026, reported by 58% of businesses. Although this share fell from the previous quarter, it matched the national average. Labour costs were the second most common concern, cited by 46% of businesses, though less widely than across the UK (53%), while energy costs were reported as a growing challenge by 45% of companies, also matching the national average (45%).
Access to capital was cited as a growing challenge by 28% of businesses in the sector, more than twice the UK average (13%), above the sector's historical norm (20%) and more widely reported than in any other sector. Government support was also a more prominent concern than in any other sector, cited by 23% of businesses, which is well above both the UK average (12%) and the sector's historical norm (13%). These concerns may reflect ongoing policy uncertainty in the sector, with no new North Sea exploration licences and the Energy Profits Levy remaining at 38% until March 2030. Availability of management skills (19%) was also more widely cited than in any other sector, and more than double the national average (9%).
Meanwhile, Energy, Water & Mining companies were less likely than the UK average in Q3 2026 to cite other common challenges for UK businesses, such as regulatory requirements (37%), customer demand (31%), the tax burden (30%) and market competition (23%).
Employment and salaries
Annual employment growth in the Energy, Water & Mining sector slowed to 0.9% in Q3 2026, its weakest rate since Q3 2021 and below the sector's historical norm (1.3%), but slightly ahead of the subdued UK average (0.7%). Despite the slowdown, businesses plan to expand their headcount by 2.8% over the coming year, the fastest rate of any sector and nearly double the UK average expectation of 1.5%.
Annual wage growth in the sector eased for the second consecutive quarter to 2.6% in Q3 2026, the slowest pace since Q4 2021 and below the 2.8% rise recorded across the UK, though still marginally above the sector's historical norm (2.5%). Companies in Energy, Water & Mining expect salary inflation to edge up to 2.8% over the next 12 months, above the 2.6% projected across the UK.
Investment
Energy, Water & Mining firms reported the strongest annual capital investment growth across all UK sectors in the year to Q3 2026, at 4.0%, well above both the UK average (2.3%) and the sector's historical norm (3.1%). Businesses plan to accelerate capital expenditure growth to 5.5% over the coming year, the fastest rate of any sector. This is their strongest forecast since Q1 2023 and more than double the 2.0% projected nationally.
Annual R&D growth rebounded to 3.4% in Q3 2026, outpacing both the national average (2.3%) and the sector's historical norm (1.8%). However, businesses expect R&D growth to moderate to 1.7% over the next 12 months, slightly below the 1.9% predicted nationally.
UK results
The UK Business Confidence Index rebounded to -0.5, from -14.6 in Q2, but remained negative for a seventh consecutive quarter. Current sales and profits proved resilient, but firms downgraded their expectations for both over the next 12 months. Geopolitical risk remained the leading challenge, while elevated input and labour costs continued to put pressure on margins. Energy costs, regulations and the tax burden remain significant challenges. The rebound was broad but uneven: confidence rose in every sector, IT & Communications was the most positive, while Property and Construction remained deeply negative.
The latest quarterly findings are based on the period 13 July to 21 September 2026.