UK mid-market firms have demonstrated remarkable resilience and growth despite persistent inflationary pressures, with revenues increasing by 11% in 2023, according to a new report from accountancy firm BDO. The BDO Mid-Market Monitor report reveals that these firms, typically with revenues between £50 million and £500 million, have outperformed expectations in a challenging economic environment.
Revenue Growth and Profitability
The report highlights that mid-market companies achieved a median revenue growth of 11% in 2023, up from 9% in 2022. Profitability also improved, with EBITDA margins rising to 12.5% from 11.8% the previous year. This growth was driven by strong domestic demand and effective cost management strategies, according to BDO.
Sector Performance
Sector-wise, the technology and services sectors led the growth, with revenues increasing by 15% and 13% respectively. Manufacturing firms also performed well, with 10% revenue growth, despite facing higher input costs. The report notes that mid-market firms in the consumer goods sector saw more modest growth of 7%, as consumers tightened spending due to inflation.
Employment and Investment
Employment among mid-market firms grew by 5% in 2023, with many firms investing in digital transformation and sustainability initiatives. BDO reported that 62% of mid-market firms plan to increase investment in technology over the next year, while 48% are focusing on sustainability measures. This investment is seen as crucial for long-term competitiveness, according to the report.
Challenges and Outlook
Despite the positive growth, mid-market firms face ongoing challenges, including rising interest rates, labor shortages, and supply chain disruptions. BDO partner Jane Haxby said, "Mid-market firms have shown remarkable adaptability, but they are not immune to the economic headwinds. Many are focusing on innovation and efficiency to navigate the current climate." The report forecasts that revenue growth will moderate to 8% in 2024, as economic conditions remain uncertain.
Regional Variations
Regionally, mid-market firms in London and the South East saw the strongest growth, with revenues up 13%, while firms in the North West and Midlands grew by 9% and 8% respectively. The report suggests that regional disparities may widen if inflation persists and access to talent remains uneven across the country.
Overall, the BDO report underscores the resilience of UK mid-market firms, which continue to drive economic activity and employment. However, sustained inflation and interest rate hikes pose risks to their growth trajectory in the coming year.
