Supply chain pressures and rising costs are two of the biggest challenges facing Midlands businesses in the year ahead, as companies set out growth plans for 2025.
According to the latest research from accountancy and business advisory firm BDO LLP, one-fifth of regional mid-sized businesses (20%) rank supply chain challenges as one of their top concerns over the next 12 months, as delayed materials and a lack of supply continue to hinder businesses.
Rising operating costs, such as energy bills and the cost of adopting new technologies like artificial intelligence (AI), is a significant challenge for nearly a quarter of Midlands companies (24%), despite inflationary pressures easing.
BDO’s bi-monthly Economic Engine survey of 500 mid-sized businesses – companies with a turnover of between £10m-£300m – has shown that accessing new capital or finance to help grow their business is also an ongoing issue for 24% of regional businesses.
Kyla Bellingall, regional managing partner at BDO in the Midlands, said: “Political and economic headwinds have continued to create a difficult trading environment for many regional businesses in 2024.
“However, with inflationary pressures stabilising and interest rates starting to reduce, the focus for the year ahead will be on addressing those challenges and focusing on where growth can be delivered.
“Undoubtedly, this will result in recruitment strategies being adjusted, with more than a quarter of Midlands businesses (29%) planning to hire more non-permanent staff and apprentices to minimise the impact of higher labour costs.
“For nearly a third (31%), greater financial support will be required to cover additional overheads, with more than one in ten regional businesses (11%) looking to develop specific roles as they move towards greater adoption of technology to drive genuine productivity gains.”
Despite the challenges facing regional businesses, BDO’s survey has shown that nearly half of mid-sized businesses (49%) feel in a stronger position compared to the start of the COVID-19 pandemic five years ago, with 36% of Midlands companies planning to invest between £3m-£5.5m over the next two to five years in order to scale their business.
Bellingall added: “There’s no doubt that the Autumn Budget has added an additional layer of pressure for many businesses; however, what it has done is provide a degree of certainty about how the UK economy will look in the coming years.
“Based on this foundation, companies intend to focus investment on adopting new technologies and upskilling staff in areas such as artificial intelligence and automation. For some, focusing on product innovation and streamlining processes is a top priority, with making supply chains more resilient also an investment intention in the coming years.”
She continued: “Investing in new technologies like AI and automation is clearly a significant priority for regional businesses, whether it’s driven by developing new products or services, or centred around recruitment and training.
“One thing is very clear, central government needs to throw its weight behind mid-sized businesses – the engine of our regional economy – if these businesses are going to succeed and that can only be achieved by introducing policy and taxation that supports their strategic ambitions.”
