Small businesses ditch green agenda as ‘survival’ becomes priority
Small businesses are ditching green finance initiatives as “ensuring survival” becomes a bigger focus for firms amid the pressures of rising costs.
The latest business growth tracker from Natwest showed prioritising of sustainability was at an all time low among small and medium-sized enterprises (SMEs) by the end of 2025.
Just 30 per cent of firms said sustainability was a ‘high priority’ for the year ahead – the lowest since the series began in early 2020.
Numerous businesses have rowed back on green policies in the last year as political rhetoric dramatically changed under the Trump administration and firms began feeling the cost-crunch.
Last week, oil major BP warned it would take a hit of up to $5bn as the value of its green energy projects withered. The multi-billion dollar write-down signalled a significant shift in BP’s “Net Zero 2050” journey, as the company pivots away from its green investments to focus on more profitable oil and gas ventures.
In the financial services sector, global banking giants initiated an exodus from the Net Zero Banking Alliance (NZBA) leading to the total restructuring of the group.
The Natwest report said firms had “suggested that green initiatives had been postponed or scaled back due to cost pressures… and the need to focus on ensuring business survival.”
It came as 73 per cent of firms said rising costs were the biggest challenge ahead.
Rising costs change business priorities
Over the last year, UK businesses have taken a hit from the ‘double whammy’ of cost hikes announced in the Autumn Budget when Chancellor Rachel Reeves increased the national minimum wage and employer’s national insurance contributions.
Economists pointed to the dual blow as helping drive up the unemployment rate, which surged past five per cent at the end of 2025.
“Costs – particularly for staff and raw materials – remain elevated, but there is reason to hope that inflation will fall over the course of the year and reduce this burden,” said Natwest chief economist Sebastian Burnside.
The business tracker also indicated the late Autumn Budget – which took place on 26 November – also contributed to the rate of decline in activity for SMEs as demand reduced amidst growing tax speculation.
A leaking bonanza on the road to the Budget hit consumer confidence, as a highly-teased income tax hike – which would later be U-turned on – led to Brits tightening their pockets.
Still, Burnside anticipated mid-market business would enter 2026 on the front foot with prospects “notably brighter” than they were 12 months prior.
“Their scale and agility meant they were able to maintain solid momentum, despite the uncertainty raised by a late November Budget,” he said.