SMEs holding back on climate action due to rising costs

The UK’s SME’s cite increased cost inflation as the biggest obstacle to climate action in the next 12 months, according to our latest Sustainable Business Tracker. 

Key findings

  • Difficulty measuring carbon footprint and staff skills shortages also seen as major constraints
  • Prioritisation of sustainability at SMEs remains subdued compared to its peak in June 2022
  • SMEs cite increased cost inflation as the biggest obstacle to climate action in the next 12 months
  • 3 in 4 large companies report low carbon energy consumption as a high priority for 2023
  • Planned investments in solar panels, battery storage and electric vehicles widely reported


UK SMEs experienced a challenging end to 2022, with business activity falling for the last six months amid shrinking demand and severe pressure on customer budgets from rising inflation.


SME construction companies experienced a particularly sharp drop in output as higher borrowing costs and worsening housing market conditions led to the fastest fall in business activity since May 2020. In contrast, SME manufacturers and service providers pointed to slower reductions in output volumes.  


A common theme reported by survey respondents was intense pressure on margins due to higher energy, raw material and staff costs, alongside more subdued pricing power.


Commenting on the latest report, Andrew Harrison, Head of Business Banking at NatWest Group, said:

“It’s concerning that businesses are saying that they’re experiencing challenges measuring their carbon footprint, and that this is standing in their way to becoming more sustainable. There are a wealth of tools out there to help companies with this, and a lot of them are free.

“All NatWest Business Banking colleagues have also been trained by the Universities of Edinburgh and Cambridge in helping businesses with their carbon reduction. These are just some of the free and easy solutions that NatWest offers companies to become more sustainable.”

Download the latest report

NatWest Sustainable Business Tracker (PDF 733KB)

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