Press Release
Optimism surges as mid-sized businesses put plans in place to manage employment cost increases
25 Mar 2025
New research from Grant Thornton UK LLP’s latest Business Outlook Tracker* shows that an increasing number of UK mid-sized businesses are set to pass on the burden of rising employment costs to employees in the form of reduced recruitment and salary freezes, and to customers through price increases.
In December last year, shortly after the Autumn Budget announcement, 55% of businesses said they planned to reduce or freeze hiring in the next six months - that figure has now increased to 69%.
Similarly, more businesses have now formed plans to pass these rising employment costs on to customers (up to 71% from 56% in December). Employees of mid-sized businesses are also more likely to be impacted by business leaders’ plans to offer reduced or no pay increases and bonuses, as well as reviewing their employee benefits offering.
The research, which offers a rolling indicator of mid-sized business sentiment, shows that ultimately, customers and employees will bear the brunt of these additional costs, as the mid-market seems confident that these planned cost-saving measures will be enough to lessen the fundamental impact of increasing wage costs on their business.
In fact, optimism across the mid-market has resurged in all areas monitored by the Business Outlook Tracker. There was a marked increase in the proportion of mid-sized businesses that are optimistic about their revenue growth over the next six months, from 71% in December last year to 85% in the latest round (February 2025). This optimism is significantly higher than the rolling average since January 2021. This pattern of optimism is also repeated for mid-sized businesses when asked about their view on the outlook of the UK economy.
By contrast, larger corporates are now less optimistic about both their own fortunes and those of the wider UK economy, as the Business Outlook Tracker recorded a drop in confidence from the 200 larger businesses also surveyed:
- -10 percentage point (pp) decrease in their optimism about the outlook of the UK economy
- -3pp decrease in their optimism about their funding position and their revenue growth
- -2pp decrease in those expecting their profits to increase
Giles Mullins, Head of Core Advisory, Grant Thornton UK LLP, said:
“Mid-sized businesses have a more positive view on the immediate future success of both their own organisation and the broader UK economy than larger firms. One potential driver for this could be the differences in exposure to the increasingly turbulent international geopolitical environment, particularly the threat of more tariffs impacting international operations.
“After years of high inflation, interest rate increases and economic and political turmoil, businesses of all sizes are used to adapting to changing cost environments, putting plans in place to protect their operations and reduce the impact to their bottom line and profit growth. But mid-sized businesses may be able to adapt more quickly to the shifting economic realities and more easily make changes to mitigate the impact of these employment costs on their operations than larger businesses, who may be faced with a larger wage bill.
“This resilience and adaptability is further evidenced by mid-market profit expectations, with over three quarters of business leaders expecting profit increases over the next six months, up from 48% in December 2024. This rapid increase in confidence may reflect an expectation that after a difficult period of low profitability, businesses are expecting growth from a lower base.
“How long this confidence will last though remains to be seen. As we head towards the Spring Statement, the majority of mid-sized businesses are also expecting the Chancellor to increase taxes on businesses again this year.”
*Censuswide, on behalf of Grant Thornton UK LLP, surveyed 607 senior decision makers in UK mid-sized businesses (defined as those with revenue between £50million - £1billion) and 200 senior decision makers in larger corporates (defined as those with revenue £1billion+) in February 2025.
