UK mid-sized businesses are rebuilding momentum and setting sights on growth after a challenging 2025, according to the latest research from tax firm BDO.
In a survey of 500 UK mid-sized business leaders, productivity gains and the adoption of technologies such as AI emerged as a key route to growth for almost half (42%) of firms.
Expansion plans are focused on both UK markets (39%) and overseas (38%). A similar number (38%) are considering mergers or partnerships to boost their growth.
Driving growth
Against a backdrop of weak business confidence and subdued employment expectations across much of the wider economy, the mid-market appears to be taking a more optimistic view, with the majority (88%) of firms looking to build on their investment plans by increasing headcount in 2026.
Financial services and technology are the sectors with the most widespread hiring plans. However, firms remain cautious, with only one in five (21%) expecting headcount growth of more than 10%.
This aligns with separate BDO analysis suggesting that mid-sized businesses could add an additional 1.9 million jobs by 2028, bringing total mid-market employment to 9.9 million and reinforcing the role these businesses play in driving UK employment growth.
Investment in new capabilities, such as technology and AI, is driving headcount increases for more than a third (36%) of businesses. This suggests hiring plans are focused on building the skills needed to support productivity improvements, rather than replacing roles.
Newly secured funding is another factor driving growth in recruitment for 31% of those surveyed.
Funding still a concern
Looking ahead, nearly a third (29%) of mid-market businesses are considering private equity or venture capital to fund their growth plans in 2026.
A further one in three (29%) are looking to existing shareholders for investment, while 27% are considering government grants and incentives. A slightly higher proportion (22%) of firms are exploring private debt or credit funds compared with new bank debt (19%).
Despite the cautious optimism for growth and investment, mid-sized business leaders remain watchful of the challenges ahead.
Cybersecurity incidents or data breaches are the most frequently cited threat to business performance in 2026 (27%).
Over a quarter (26%) of respondents to the BDO survey also cited energy or input costs as a top concern, with the same proportion worried about weakening international demand or geopolitical impact.
“It is fair to say current economic conditions remain challenging, with reports of businesses slowing down hiring amid high costs and low business and consumer confidence. However, mid-market businesses remain resilient and though still erring on the side of caution, these growth plans offer a glimmer of hope for 2026,” said Richard Austin, Partner at BDO.
“The mid-market is an engine of the UK’s economy – it is key to unlocking growth, but cost pressures still loom large. Turning ambition into delivery will depend not just on business strategy, but on whether the wider operating and policy environment allows the mid-market to do what it does best: invest, grow and create jobs.”
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