UK mid-market outperforms expectations but skills gaps and supply chain disruption persist
UK mid-market outperforms expectations but skills gaps and supply chain disruption persist
- Three quarters of UK mid-sized businesses already exceeding 2025 growth targets, fuelled by greater access to finance, resilient customer demand and AI adoption
- Two in three maintaining investment and nearly a third increasing it, despite global and domestic headwinds
- But confidence in the UK as a home for long-term growth is less positive with one in five already shifting some operations or investment overseas
- Top business pressures are skills shortages (36%) and supply chain disruption (32%), underlining structural challenges facing UK companies
UK mid-sized businesses are reporting stronger-than-expected performance in 2025, fuelled by greater access to finance, AI adoption and resilient customer demand, according to the latest Economic Engine research from accounting and business advisory firm, BDO.
The survey of over 500 mid-sized business leaders shows almost three-quarters (74%) have already beaten the growth targets they set at the start of the year, with 19% saying they have significantly exceeded expectations and just 2% reporting they are behind.
Access to external finance (42%) and rising customer demand (40%) were key drivers of outperformance, supported by productivity gains from technology and AI (39%), successful product or service launches (39%) and better-than-expected recruitment and retention (39%).
This positive trading picture is translating into continued capital commitment. Two-thirds (66%) are holding investment steady and 29% are stepping it up, with only 5% delaying and fewer than 1% pausing or withdrawing investment. These figures suggest firms are backing their own pipelines and balance sheets, even as wider economic sentiment remains subdued.
Challenging environment knocks confidence in the UK
Despite their strong performance, businesses’ confidence in the UK as a place to grow remains limited. Just 35% of mid-sized companies surveyed describe the UK as a “strong environment” for long-term business growth, while 65% say conditions have become more challenging. One in five (20%) are already shifting operations or investment overseas.
That caution reflects persistent structural pressures. On workforce issues, over a third (36%) cite plugging skills gaps as their biggest challenge. Rising wage expectations are another major pressure (24%), likely reflecting the ongoing effects of inflation and higher National Insurance contributions.
Operationally, managing supply chain disruption is the most pressing barrier to growth (32%). At the same time, while AI is seen as a driver of productivity, one in four firms (23%) cite adopting new technologies as a challenge, highlighting the uneven pace of digital transformation across the mid-market.
Growth plans centre on partnerships, finance and technology
To fuel their growth, mid-sized businesses are forming new strategic partnerships (45%), looking to secure new investment or finance (42%) and investing in automation, technology or AI (42%). A further 37% are expanding their physical footprint or operations and the same proportion are entering new markets. These data points show a mid-market willing to commit capital to capacity and innovation, but pragmatic about directing growth wherever conditions are most favourable, in the UK or overseas.
Richard Austin, partner at BDO, said: “These findings highlight the strength of the UK’s mid-market: businesses are delivering growth and continuing to invest despite challenging conditions. But they also carry a warning: confidence in the UK as a place to scale is not assured.
“With mid-sized businesses forecast to contribute £745 billion to UK GVA and create an extra 1.9 million jobs by 2028, the government will want to use the Autumn Budget to reassure this section of the market and address persistent barriers around skills, costs and competitiveness. Only with the mid-market firmly and confidently anchored in the UK, will we see the growth the economy needs.
ENDS
Note to editors
BDO LLP operates in 18 offices across the UK, employing 8,000 people. It has UK revenues of £1bn.
It provides Audit, Tax, Deals, and Consulting, Risk & Outsourcing services predominantly to mid-sized, entrepreneurially-spirited, high-growth businesses that are driving growth in the UK economy. BDO calls this segment of the market the UK’s economic engine.
BDO LLP is the UK member firm of the BDO international network.
BDO’s global network
The BDO global network provides business advisory services in 166 countries and territories, with more than 119,000 people working out of 1,800 offices worldwide. It has revenues of US$15bn.
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