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UK Small business growth loses momentum in June 2023

Business growth lost momentum in the last three months to June after bouncing back strongly earlier this year according to our latest UK SME research.

UK SME Business performance

Business growth lost momentum in the last three months to June after bouncing back strongly earlier this year, according to the latest NatWest survey of small to medium-sized businesses. The NatWest SME PMI® Business Activity Index posted 50.9 in June, down from 52.1 in May, to signal the slowest rate of growth for six months.

SME service providers experienced a particularly sharp slowdown in activity this quarter, as elevated inflation restrained consumer and business budgets. Subdued housing market conditions and rising interest rates also held back residential building work in the construction sector.

Despite the slowdown in growth, employment in small businesses increased across all sectors in June, outpacing that seen by large firms. This was linked to small businesses responding to forecasted business needs as well as backfilling vacancies as candidate availability improved.

 

Sebastian Burnside, NatWest Chief Economist, said:

“Businesses have had their hands full with a rapidly changing economic landscape this year. The widely forecast recession failed to materialise as demand held up well, but now steep increases in interest rates are adding a further threat. Many measures to improve sustainability have upfront capital costs but payback through lower operating costs in later years. Higher interest rates may dent the relative attractiveness of these investments, so businesses’ appetite will be tested.

“It is encouraging to hear reports that supply chain conditions have been improving, as businesses have said these often form a major barrier to action. And firms of all sizes are increasingly using sustainability credentials as an important criteria for choosing who to buy from.”

NatWest SME Business Tracker

Read the latest insights into UK SME performance and sustainability intentions (PDF 376 KB)

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Sustainability action plans at UK SMEs

We also asked SMEs about their sustainability ambitions as part of our research.

 

The key findings were:

  • The survey indicated that environmental sustainability has fallen down SMEs’ list of priorities in comparison to the peak seen last summer.
  • In contrast, around 66% of large enterprises reported action on sustainability as a high priority in the next 12 months.
  • Some 45% of SMEs intend to switch to suppliers with environmental credentials within the next five years, while around 42% plan to source suppliers that are based in the UK. Switching to suppliers with green credentials was the top priority for large firms.

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