By Jennifer Sieg
Business activity for UK small and medium enterprises (SMEs) has reached its highest since May of last year, the latest data shows, but one particular challenge remains clear.
The Natwest SME PMI Business Activity Index recorded a score of 51.2 in December, a slight uptick from 50.7 the month prior, and the highest recording in seven months.
While this comes as a positive sign for UK businesses – along with a rise in consumer spending and a previous pause of interest rate hikes – SMEs are beginning to report sustainable sacrifices to save on costs.
Rising business costs, one of the top listed concerns for UK SMEs, are making it difficult to reach environmental sustainability goals, the survey showed, particularly for manufacturers.
Sebastian Burnside, Natwest chief economist, said: “Small businesses are starting 2024 on a positive footing with confidence getting back to pre-energy crisis highs.
“Costs are clearly a concern and rising wages, especially the national minimum wage, means businesses are going to be working hard to find efficiencies this year.
“That may mean sustainability initiatives slide down the priority list for some, but investments in energy efficiency will make even more sense for others.”
The latest Natwest Sustainable Business Tracker recorded only 35 per cent of UK SMEs placed sustainability as their priority ahead – the lowest since the survey launched in 2020.
James Holian, head of business Banking at Natwest Group, said: “The services sector in particular has been buoyed by strong sales in the last quarter as borrowing costs have eased.
“With business confidence now at its highest level in over a year there’s a real sense of momentum as we start 2024.”
However, he said rising business costs may be what stands in the way of some businesses looking to improve or build sustainability initiatives – with some 25 per cent finding it difficult to make a business case for sustainability.
