When the Autumn Budget landed on 28 October, the most important number for lenders wasn’t a tax rate. It was the energy price path underneath the forecasts.
According to the Office for Budget Responsibility’s October 2026 Economic and fiscal outlook, oil prices are now expected to run around 30% higher in 2026 and 2027 than assumed in March, with higher energy prices pushing CPI inflation to a peak of about 3¾% in early 2027. The OBR also expects growth to slow to 1% next year as those costs feed through to households and businesses.
For SME borrowers, that isn’t a macro footnote. It’s a cash-flow question, which makes it a credit question.
Why Energy Costs Show Up in Credit Quality
Energy is one of the few operating costs an SME can’t switch off. For a restaurant, a bakery or a small manufacturer, a sharp rise in unit rates lands straight on margins, often at renewal with little warning.
That pressure tends to surface in familiar places:
- Tighter debt service cover as margins shrink
- Heavier use of overdrafts and revolving facilities
- Postponed efficiency investment, locking in higher costs
- Supplier arrears building before they reach the lender
By the time these appear in management accounts, the shock is already months old.
The Data Gap in SME Energy Exposure
Most credit assessments see turnover, profit and repayment history. Very few see how much energy a business uses, what it pays, or when its contract ends.
That information exists. It sits in bills, contracts and supplier portals, but for most SMEs it is fragmented and not streamlined into anything a bank can use. Lenders fall back on sector averages, which can hide very different exposures between neighbouring businesses.
This matters for supervision too. The PRA’s SS5/25 expects banks to embed climate-related risks, including transition risk, into how they manage credit. Energy dependency is one of the most measurable channels for that risk in an SME book.
What This Means for Banks
Energy exposure is a resilience signal and an affordability signal at the same time. A borrower that knows its consumption, understands its contract position and is actively reducing usage is better placed to absorb the next shock than one with no visibility of any of it.
Bringing SME energy information into credit assessment helps banks spot stress earlier, price risk more accurately and have better customer conversations. It also builds the transition data that sits behind financed emissions reporting under PCAF.
About the Climate Action Platform
The Climate Action platform, developed and deployed by NatWest and National Australia Bank, helps banks collect energy information directly from their SME clients. SMEs build their own sustainability data profile, with relevant actions to improve it, while banks gain consistent, client-level evidence to inform transition finance decisions and financed emissions reporting.
Built on The Disruption House’s Risk & Resilience Intelligence, it reduces reliance on proxy and sector-average assumptions.
Get Ahead of the Next Energy Shock
Want to see how SME energy information could strengthen your view of portfolio resilience? Click Contact Us to speak with our team.
