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Key findings:

  • NatWest’s Mid-market Growth Tracker shows improved business growth in March, led by a strong service sector performance
  • SMEs register a softer decline in output levels during March
  • Market conditions remain challenging and we could see continued challenges in the coming months

 

Mid-market businesses continued to outperform the wider UK economy in March, as business activity rose for the sixteenth month in a row, the latest NatWest UK Business Growth Tracker has found.

The NatWest tracker uses the industry standard Purchasing Managers’ Index ™ (PMI®) to provide an ongoing view of business performance and sentiment across the UK. The index picked up from 53.1 in February to 54.7 in March. The rate of growth was solid and slightly faster than that seen on average over 2024. The upturn in business activity among mid-market firms was driven by stronger performance in the service sector, which registered the fastest increase in output for six months.

Whilst the private sector as a whole recorded marginal growth in the first quarter of 2025, small and medium-sized enterprises (SMEs) saw a modest decline in output levels. The headline NatWest UK SME Business Activity Index registered 48.2 in March, below the 50.0 threshold that separates growth from contraction for the fourth month running. However, the index was up from 46.8 in February, making March’s output data the slowest pace of decline recorded so far this year.

NatWest’s tracker also found that UK businesses’ experiences of the economy in the first quarter of 2025 varied substantially depending on their size, sector and location. SME construction companies recorded the fastest downturn in business activity (index at 42.5), followed by manufacturers (44.5), while the service sector showed the most resilience (49.5). Across the mid-market, the services economy was likewise the bright spot (index at 56.3), having recorded its quickest increase in output for seven months. Mid-market manufacturers meanwhile signalled the steepest reduction in production for just over a year (46.3).

 

Sebastian Burnside, NatWest’s Chief Economist, said:

“Across the private sector as a whole, business output grew modestly in the first quarter of 2025, though the experiences of companies varies substantially by their size, sector and location.

“Mid-market businesses continue to play a leading role in driving economic growth – as seen in the improvement in business output and new orders recorded in March’s data. However, SMEs have found the first quarter of the year more challenging, with subdued demand conditions and rising costs continuing to exert pressure on their margins.

“Price pressures remain high across the board and businesses of all sizes are looking to control costs. Higher payroll costs have led businesses to scale back on recruitment – though our tracker indicates this process may now be largely complete as the employment score is notably stronger in March than it was in February.

“Businesses remained positive about the outlook for the year ahead in March. But as we’ve seen in the last few weeks, market conditions can change rapidly and recent tariff announcements suggest we could see continued uncertainty in the coming months.”

 

New work

New orders received by mid-market companies rose again in March, stretching the current period of expansion to 17 months. The upturn was the softest seen over this sequence, however, and only marginal. Although SMEs recorded a fourth consecutive monthly drop in new business, the pace of contraction was the softest seen in 2025 to date.

 

Employment

Employment at mid-market firms declined at a notably softer pace in March. A number of monitored companies mentioned reducing their staffing levels and adopting recruitment freezes to keep a lid on costs, which had been pushed up due to greater payroll expenses. Meanwhile, SMEs indicated a relatively muted pace of job cuts in March, reflecting efforts to retain skilled staff and focus on long-term business expansion objectives.

 

Input prices

A combination of subdued demand and strong cost inflation continued to exert pressure on operating margins at SMEs in March. The latest rise in average cost burdens was the fastest since April 2023. Survey respondents widely commented on rising salary payments and efforts by suppliers to pass on higher payroll costs. The latest data indicated that average operating expenses faced by mid-market companies continued to rise sharply during March. This was despite the rate of inflation moderating to a five-month low.

 

Business confidence

SME business activity expectations improved for the second month running in March. This was driven by the highest level of optimism among SME service providers since October 2024. When assessing the one-year outlook for output, mid-market firms likewise maintained a positive stance in March. However, concerns over costs and deteriorating market conditions globally weighed on expectations at some firms.

NatWest UK Business Growth Tracker

Download the March 2025 NatWest UK Business Growth Tracker.

Download

Media contact

Lucy Chislett, Media Relations Manager on 0797486900 or lucy.chislett@natwest.com

 

Notes to editors

 

About the NatWest UK Business Growth Tracker

The NatWest UK Business Growth Tracker is a quarterly report, designed to monitor business performance at UK small and medium-sized enterprises (1-249 employees) and mid-market corporates (more than 249 employees). Results are compiled from responses to S&P Global UK Purchasing Managers’ Index™ (PMI®) surveys. We also track sustainability actions across five main categories.

The panel of around 850 small and medium-sized enterprises and 200 mid-market enterprises is stratified by detailed sector, based on contributions to GDP.

Survey responses are collected by S&P Global in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses.

The UK Business Growth Tracker indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted. Indices are compiled for a range of survey variables, including business activity, new orders, employment, input costs, prices charged, suppliers' delivery times and future activity.

The UK Business Growth Tracker data for March were collected 12 – 28 March 2025. Composite data are available from January 1998. Manufacturing data are available from January 1992, Services data from July 1996 and Construction data from April 1997.

For further information on the PMI survey methodology, please contact economics@spglobal.com.

 

About NatWest 

NatWest serves customers in England and Wales, supporting them with their personal, private, and business banking needs. NatWest helps customers at all stages in their lives, from opening student accounts, to buying their first home, setting up a business, and saving for retirement.

Alongside a wide range of banking services, NatWest offers businesses specialist sector knowledge in areas such as manufacturing and technology, as well as access to specialist entrepreneurial support.

 

About S&P Global (NYSE: SPGI)

S&P Global provides essential intelligence. We enable governments, businesses and individuals with the right data, expertise and connected technology so that they can make decisions with conviction. From helping our customers assess new investments to guiding them through ESG and energy transition across supply chains, we unlock new opportunities, solve challenges and accelerate progress for the world.

We are widely sought after by many of the world’s leading organizations to provide credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help the world’s leading organizations plan for tomorrow, today. www.spglobal.com.

 

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