Investec mid-market sentiment survey

Taking the temperature of UK business leaders

It’s been a challenging year for UK businesses. A litany of pressures – including global market volatility, trade wars and rising input prices – has weighed heavily on ambitions for growth and investment.

How are business leaders responding?

We surveyed mid-market firms from diverse sectors, including manufacturing, technology and healthcare, and asked their views on the UK’s economic prospects and how they expect this to affect their business objectives; what the financing environment looks over the next few years; and how factors such as the development of artificial intelligence (AI) will play a role in the future.

Far from taking a pessimistic view, many businesses are looking over the horizon to see further growth potential ahead.

Business leaders are pessimistic on the UK economy…

The UK economy has only stuttered forward in 2025. GDP growth has been challenging. Real GDP growth was just 0.1% in Q3, compared to the previous quarter, and we have nudged down our forecasts for 2025 and 2026 to 1.4% and 1.5%, respectively.

As the Autumn Budget approaches, it looks increasingly likely that the government may break a key manifesto pledge and raise one of its main tax rates – income tax, national insurance or VAT.

Our survey showed that most business leaders are either neutral or negative on the economic conditions. Only one in five said they believed the economic situation would improve in the next 12 months. Nearly half (46%) said they believed conditions would get worse.

How do you perceive the overall economic conditions in the UK?

How do you expect the economic conditions to be in 12 months’ time?

Nearly 80% cited uncertainty about future fiscal policy as one of the main risks to economic growth. More than half are worried about rising inflation (52%), consumer confidence (58%) and geopolitical uncertainty (53%).

There is also pessimism on the prospects for inflation. While our economics team forecasts that the UK Bank Rate will moderate to 3.25% by end 2026, 58% of respondents believe rates will remain between 3.5–4%.

…but they are much more confident about their own prospects

79% expect their business to grow over the next three years. In fact, one fifth of respondents were forecasting growth of 5%.
 

How do you see growth prospects for your business over the next one to three years?

The most popular strategy to achieve their growth forecast was expanding into new markets, with three out of five (63%) businesses citing this strategy. Around half (49%) favoured introducing new products, and one in four (25%) believed M&A activity would be required.

Which strategies are required to achieve your business goals?

Respondents could choose more than one option

For some companies the route to success lies in becoming leaner. Four out of ten (41%) respondents said cutting costs was required to achieve their goals. This view was most common in the manufacturing and transport sectors.

When it came to possible roadblocks to success, leaders were split. Interest rates (42%) and raw material prices (40%) rising energy prices (33%) were a key concern, especially among respondents in the manufacturing sector.

Businesses are also more optimistic about their funding options

Despite economic concerns, businesses are willing to borrow and think funding remains available to help them grow. 67% of respondents thought there had been no material change in availability of funding.
 

Nearly half (48%) said they would consider borrowing to fund business growth, a third would seek new capital and nearly four out of 10 would consider digging into the cash reserves.
 

If funding is required to drive business growth, which of the following would you consider?

Respondents could choose more than one option

One in four of the businesses we surveyed had either sought new credit facilities or increased an existing one over the last 12 months. Of those who sought funding, 70% used this to fund working capital, while 33% would use it for investment or capital expenditure.

What do businesses expect could make them change their cashflow management in the future? Leaders were split between needing greater liquidity (31%) and needing to invest more in the business (36%).

Office space: is this the end for ‘right sizing’?

The proportion of hybrid workers in the UK since 2020 has increased. More than a quarter (28%) of the workforce had adopted a hybrid model in the first quarter of 2025¹ and a survey from CBRE earlier this year showed that more than half of companies (55%) expected to reduce their office footprint in the medium term.²

Only a small number of respondents said they planned to increase office space over the next three years (17%), and in most cases this was supporting business expansion rather than to enable workers returning to work. But few planned to cut back either. The majority (69%) said they were maintaining their current space.
 

When it comes to selecting new office space, the most important factor is cost. This was ranked number one for more than half of our survey respondents. Location and accessibility were also highly rated, as nearly 90% of respondents put these in their top two.

AI: Companies positive on the use of AI

AI is now an intrinsic part of daily life. In October, 23% of business reported they are currently using some form of AI, up 3 percentage points from June 2025 (Office for National Statistics).³

Almost all survey respondents believe the positives outweigh the negatives. More than 80% said AI would have a positive impact (20% said it would have a very positive impact). Nearly 40% said it could help improve both revenue growth and cost efficiency.

Attracting talent: is it getting harder to get the right employees?

The UK jobs market has steadied itself over recent months. However, there have been mixed messages on confidence levels. According to CIPD’s summer Labour Market Outlook, the net employment balance (the difference between whether employers expect to increase or decrease staffing levels over the next three months) is at its lowest outside of the pandemic, at +9.⁴

From our survey, labour-market pressure was relatively low on the list of possible risks to economic growth. This is also borne out by opinions on attracting and retaining key talent. While 31% of respondents said it was harder to attract the employees required to achieve business objectives compared with the year before, most felt it was either about average or fairly easy to do so.
 

However, more than 80% expect the cost of staff will increase in the next three years.

Sustainability: is it still important?

In the last year, some high-profile corporations have reduced their support for ESG and climate commitments. However, the message from our survey was that sustainability had not fallen down their agenda.

Nearly 40% said they were increasing their focus, with the overriding reason being a shift in customer or societal interest (71%). Only 6% said they were putting less emphasis on sustainability practices.

¹ Source: Office for National Statistics
² Source: CBRE: European Office Occupier Sentiment Survey 2025 | CBRE UK
³ Source: Office for National Statistics
⁴ Source: CIPD Labour Market Outlook – Summer 2025

Investec’s mid-market report is based on the results of a proprietary survey of mid-market business owners and leaders. It provides insight into the mindset of the UK mid-market. The survey was conducted in October 2025 and the results are compiled from over 100 respondents.

Important information:

This article is for general information purposes only and should not be used or relied upon as professional advice. It is advisable to contact a professional advisor if you need financial advice. The opinions featured are not to be considered the opinions of Investec.