South West mid-sized businesses invest in innovation despite headwinds
Barriers to international expansion is the top pressure facing South West mid-market businesses over the next six months, according to BDO’s latest survey of 500 mid-sized business leaders with turnovers between £10m-£300m.
Exporting products or services overseas has become a leading challenge facing more than three-fifths of mid-sized businesses (65%) due to disruption from delayed deliveries and stock shortages.
More than a third (38%) say they need better support from the Government to begin or continue exporting abroad. This includes broadening access to UK Export Finance support to the mid-market, new Free Trade Agreements and simpler customs rules to aid the export of products or services overseas.
Sourcing new capital and responding to pressures related to sustainability (e.g., changing consumer demands and government commitments to net zero) are also significant challenges for 24% of businesses in the region.
Meanwhile, rising workforce costs such as National Insurance contributions (NICs) and the Living Wage, which both increase next month, are a concern for nearly one in five (18%).
As the majority of mid-sized companies (97%) brace themselves for further cost increases in 2025, 26% will have to delay hiring, freeze recruitment or scale back future plans to hire new staff to mitigate higher costs.
South West businesses say incentives would be useful to help upskill or recruit more staff whilst they address skills shortages and workforce costs rise. More than a quarter (26%) recommend making the Growth and Skills Levy accessible to career changers.
Despite these challenges, mid-sized businesses remain resilient and are still striving to grow. Nearly a quarter (24%) of South West companies plan to invest in new technologies such as AI and automation, 24% will look to R&D to offer more innovative products and services for customers and a further 24% are planning to broaden the range of products and services they offer.
David Brookes, regional managing partner at BDO in the South West, said: “It’s encouraging to see such a high proportion of regional businesses planning to invest in new technologies, R&D and expanding products and services despite the challenges they face around international growth.
“Mid-market companies are the engine room of the South West economy – employing more than half a million people and contributing significant domestic investment. Creating the right operating environment for the mid-market to deliver growth must be high on the agenda for Government and business leaders alike.”
