Rising costs and funding gaps threaten UK mid market growth
Rising costs and funding gaps threaten UK mid market growth
- Mid-sized firms show strong intent to grow, but rising costs and tightening financing conditions could threaten plans
- Firms are turning to private credit and alternative sources of capital to pay bills and fund growth in a high-cost environment
- One in two (49%) say their growth plans depend on financing conditions remaining stable or improving.
Mid-sized businesses in the UK are setting their sights on growth in 2026, but are facing challenges around access to finance as cost pressures loom, according to the latest research from BDO.
In a bi-monthly report covering 500 mid-market businesses with revenues between £10m and £500m, nearly two-thirds (62%) identified winning new UK-based customers and contracts as their top growth opportunity over the next year. Almost half (46%) plan to launch new products or services to drive expansion.
Investment intentions remain strong, with the majority holding ambitions to increase their investment in the UK over the next 12 months.
Cost pressures and access to finance remain the biggest brake on growth
Despite these ambitions, businesses are facing major challenges around cost pressures and access to finance. Half of mid-market firms (51%) cited heightened costs including energy bills, labour and raw materials as their biggest barrier to growth in the next six months. Given the current conflict in the Middle East this is likely to be exacerbated further.
Access to funding also remains a significant barrier to growth for almost half (45%), closely followed by cashflow pressures (40%) and the cost of borrowing (35%).
Growth ambition depends on a stable financial environment
To fund expansion and manage rising costs, mid-market businesses are increasingly diversifying their sources of capital, with more than half (56%) exploring private credit funds and half considering private equity.
While 41% of firms report that they already have sufficient funding in place for the next 12 months, one in two (49%) say their growth plans depend on financing conditions remaining stable or improving. Almost one in 10 (9%) are likely to scale back or delay their plans because funding is too costly or difficult to secure.
For more than half (52%), aversion from investors was a top challenge in accessing additional finance, as well as tighter lending criteria or availability of credit (47%). The complexity and speed of the lending process were deemed a bigger challenge than the actual cost of borrowing, with 36% citing this as a top challenge vs. 29% more concerned around cost.
Richard Austin, partner at BDO, said: “The UK mid-market should not be underestimated. These businesses are a powerhouse of our economy and clearly want to invest and grow.
“At the same time, businesses are navigating a highly uncertain global backdrop. The likelihood of significant further increases in fuel and energy prices given tensions in the Middle East, adds another layer of cost pressure at a time when margins are already tight.
“Whether these ambitions translate into sustained growth will depend on costs stabilising, borrowing conditions remaining supportive, and firms having access to a broad range of financing options that provide flexibility in an uncertain environment.
“Stronger access to capital is crucial if that investment is to materialise. This could include more financial incentives for investors to address persistent funding gaps for scaling firms, continuing momentum on the government’s new PISCES initiative and action to reduce the tax-led bias towards debt financing.”
ENDS
Note to editors
Findings are based on a survey of 500 C-suite executives in UK mid-market businesses (revenue £10m–£500m). Fieldwork took place between 16 February and 2 March 2026. Some questions allowed multiple responses. The sample was quota-controlled by region and sector, with maximum targets in specific company types (e.g. PE-backed/AIM-listed) also.
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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