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Tracking the health of UK SMEs

Our latest research and commentary highlights recovery in UK SME output.

Key Findings

  • Recovery in overall UK SME output supported by renewed manufacturing sector expansion
  • Service sector remains the main growth engine
  • Spending on more energy efficient business processes is projected to rise at a fast rate among SMEs, with 18% planning to invest in the next year and 41% within five years
  • Over half of UK SMEs plan to invest in EV infrastructure or have already done so

UK SME Business performance

 

Business activity among UK SMEs expanded at a solid rate throughout the first quarter of 2024 with the NatWest SME PMI Business Activity Index recording 52.6 in March.

Our index is a key indicator of the health of the UK SME economy. A PMI reading over 50.0 indicates growth or expansion, while a reading under 50.0 suggests contraction.

The recovery in overall SME output levels was driven by improving order books, with new work increasing for the fourth month running in March. Leading the way, the services sector recorded the fastest upturn in business activity in March, followed by the manufacturing sector.

 

Sebastian Burnside, NatWest Group Chief Economist, said:

“Businesses have shown great resilience in the face of challenging market conditions as rocketing inflation and then rising interest rates made their mark. So, it’s good to see that firms are now reporting much more muted inflationary pressures at the same time as five months of growth in a row."

“When it comes to job creation, the picture is more varied. Higher levels of SME employment largely reflects greater recruitment in the service economy, while hiring trends were much more subdued in manufacturing and construction. But optimism about future activity is widely shared with both services and manufacturing registering scores of above 70.”

NatWest SME PMI® Tracker

Read the latest insights into UK SME performance and sustainability intentions

PMI® Tracker

Sustainability action plans at UK SMEs

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

 

The key findings were:

  • There was a rise in the proportion of SMEs that have already invested in renewable energy investment plans compared to the same period in 2023.
  • Over half of UK SMEs plan to spend on EV infrastructure or have already done so.
  • UK SMEs were most likely to report plans to invest in more energy efficient business processes over the coming 12 months. Currently, 11% of small and medium-sized enterprises have already invested, a slight uptick from the 8% recorded during the same period last year.

 

Commenting on SME’s sustainability action plans, our Head of Business Banking James Holian said:

“these findings show that over half of UK SMEs plan to spend on electric vehicle infrastructure or have already done so. As well as the environmental benefits, many businesses stand to benefit financially in the long term by transitioning their fleets.”

Supporting customers’ sustainability plans

Find out how we helped timber products business Archwood Group invest in their climate plans.

Find out here

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