Midlands mid-sized businesses are reporting stronger-than-expected performance in 2025, fuelled by resilient customer demand, AI adoption and an improving skills outlook, according to the latest Economic Engine research from accounting and business advisory firm, BDO.
The survey of over 500 mid-sized business leaders shows more than three-quarters (76%) have already beaten growth targets set at the start of the year, with one-fifth (20%) saying they have significantly exceeded expectations.
Better-than-expected staff recruitment and retention (49%) and rising customer demand (47%) were key drivers of outperformance, supported by productivity gains from technology and AI (43%).
This positive trading picture is translating into continued capital commitment. Over half (51%) are holding investment steady, with more than a third (37)% stepping it up. Only one in 10 (11%) are delaying or scaling back UK investment. These figures suggest regional companies are backing their own pipelines and balance sheets, even as wider economic sentiment remains subdued.
Despite their strong performance, confidence in the UK as a place to grow remains limited for some Midlands businesses. Nearly two-fifths (39%) of mid-sized companies surveyed describe the UK as a “strong environment” for long-term business growth, while 61% 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, a third (33%) cite plugging skills gaps as their biggest challenge. Rising wage expectations are another significant pressure (17%), reflecting the ongoing effects of inflation and higher National Insurance contributions.
Operationally, managing supply chain disruption is one of the most pressing barriers to growth (24%). At the same time, while AI is seen as a driver of productivity, more than a quarter of Midlands companies (26%) cite adopting new technologies as a challenge, highlighting the uneven pace of digital transformation across the mid-market.
To fuel their growth, Midlands mid-sized businesses are looking to secure new investment or finance (53%) and investing in automation, technology or AI (51%). A further 36% are launching new products or services.
Kyla Bellingall, regional managing partner at BDO in the Midlands, said: “These findings highlight the strength of the Midland’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 guaranteed.
“With mid-sized businesses continuing to contribute significantly to the regional economy, creating a wealth of additional jobs to boost the future outlook in the Midlands, the government will want to use the Autumn Budget to reassure this segment of the market and address persistent barriers around skills, costs and competitiveness. Only with the mid-market firmly and confidently anchored in the Midlands, will we see the growth the regional economy needs.”
