Business activity at
Adding to signs of a steady turnaround in business conditions, new orders stabilised at the end of 2023, which ended a five-month period of reduced workloads.
The headline NatWest SME PMI Business Activity Index registered 51.2 in December, up from 50.7 in November and the highest reading since May. This signalled a marginal overall increase in SME business activity, with growth in the service economy more than offsetting sustained declines in manufacturing and construction output. The latest fall in manufacturing production was the steepest since
Survey respondents often commented on relief at the pause in
Elevated wage pressures and squeezed margins meant that
Input cost inflation accelerated to its highest since September, which was overwhelmingly linked to greater salary payments. December data also signalled a robust rise in prices charged by SMEs, led by those operating in the service sector, largely in response to higher operating expenses.
Meanwhile, the latest NatWest Sustainable Business Tracker indicated that 35% of
Finally, our special feature on obstacles to sustainability actions in 2024 illustrated that worries about higher business costs were by far the most prevalent constraint cited by
Large enterprises also noted that rising business costs (59%) were the top ranking obstacle for 2024, while uncertainty about government regulation was the second-highest cited constraint on sustainability action (37%).
'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 market's expectations of interest rate cuts may also help lower financing costs, if the
'After a turbulent year for the economy, it is really encouraging to see that small businesses ended 2023 in higher spirits, with growth accelerating at the fastest rate since May. 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.
'For those businesses looking to improve their environmental sustainability, rising business costs remain the biggest challenge. At
Obstacles to sustainability goals in 2024
Of the ten potential barriers covered by the survey, rising business costs were cited as the biggest challenge for SMEs when looking to improve their environmental sustainability. Six-in-ten SMEs noted this as the largest obstacle, with manufacturers more likely to report this as a constraint than services companies (66% versus 54%).
Furthermore, the proportion of SMEs stating rising costs as a barrier was nearly double that recorded for the next biggest obstacle; the inability to accurately measure their carbon footprint (31% of all SMEs).
A number of companies reported that suppliers, particularly those based overseas, were often unable to provide information on their carbon emissions, which made it challenging to calculate their companies' overall footprint.
A lack of customer demand for more sustainable products (26% of all SMEs) and difficulties in making a business case for sustainability in terms of cost savings (25%) were also key concerns.
While rising business expenses were also the main concern among large companies when it came to future sustainability goals in 2024 (59%), uncertainty around government regulation placed second in the rankings of top obstacles. Around 37% of large firms reported uncertainty around government policy as a constraint on sustainability plans for the year ahead, compared to 30% of SMEs.
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