UK’s NatWest Group indicated that British companies are holding firm in the face of escalating international tensions and sharper cost pressures. This, according to the latest NatWest UK Business Growth Tracker. The survey, which monitors mid-market and small-to-medium enterprises (SMEs) across manufacturing and services, indicates that private-sector activity continued to expand during the first quarter of 2026, even as broader economic signals point to caution.
According to the insights from NatWest, the headline index for mid-market firms—those employing between 100 and 2,500 staff—stood at 53.0 in March, signaling ongoing growth for more than five consecutive years.
Although this marked a dip from February’s 54.8 reading, it remained comfortably above the 50 threshold that separates expansion from contraction and outperformed the wider UK purchasing managers’ index figure of 50.3.
Services businesses drove the upturn with a solid 54.2 score, while manufacturing activity eased to 46.5, reflecting softer demand and operational strains.
SMEs, by contrast, posted a modest contraction, though the downturn was milder than late last year and job losses eased noticeably.
Looking ahead, optimism persists for the most part. The mid-market future activity index registered 71.6, still pointing to robust expected output growth over the coming year despite slipping from February’s higher level.
SMEs forecast a more tempered 60.8, the lowest reading since April 2025. Both groups cited geopolitical friction—particularly the Middle East conflict—as a drag on confidence, alongside renewed inflationary worries.
Export orders weakened across the board, with mid-market firms reporting the first outright decline since October 2025.
Cost pressures have intensified markedly. Input-price inflation hit its highest level since January 2023, fueled by surging fuel, transport, and raw-material expenses linked to oil-price spikes and petrochemical shortages.
Manufacturers bore the brunt, while SMEs recorded their steepest cost rise in over three years. New business inflows slowed: SMEs saw the quickest drop in six months, and mid-market order growth eased to its weakest pace in the same period.
Supply-chain bottlenecks worsened, with delivery times stretching to their longest in nearly four years—the most severe since mid-2022—owing to shipping delays and tighter global supplies.
Employment trends remained subdued but stabilised. SMEs continued light staffing cuts that began in late 2024, yet the pace moderated.
Mid-market payrolls held broadly steady, with the latest decline the smallest in five months.
Despite near-term caution, many firms are pressing ahead with longer-term strategies.
Industry professionals are now said to be prioritizing investment in new technologies, efficiency improvements, and fresh export markets to build resilience.
NatWest’s Chief Economist Sebastian Burnside noted that businesses “have continued to show resilience against the backdrop of a more challenging operating environment,” highlighting rising fuel and transport costs while praising forward-looking adaptation plans.
Andy Gray, Managing Director of Commercial Mid-Market at NatWest, added that companies “are continuing to adapt and invest where it makes strategic sense,” balancing short-term prudence with ambitions for sustained growth.
The Tracker, based on responses collected between 12 and 27 March from roughly 850 SMEs and 330 mid-market enterprises, underscores a picture of cautious optimism. While immediate headwinds from global uncertainty and inflation are testing resolve, UK businesses appear determined to invest in innovation and steady expansion of their operations.