Mid-sized businesses in the South East are setting their sights on growth in 2026, but are facing challenges around access to finance as cost pressures loom, according to the latest research from BDO.
The firm’s bi-monthly Economic Engine survey of 500 mid-market businesses – companies with revenues between £10m and £500m – shows that more than a third (39%) identified winning new UK-based customers and contracts as one of their top growth opportunities over the next year. Nearly half (48%) plan to launch new products or services to drive expansion.
Investment intentions remain strong, with the majority aiming to increase their investment in the UK over the next 12 months.
Cost pressures and access to finance remain the biggest brake on growth
Despite these ambitions, South East businesses are facing major challenges around cost pressures and access to finance. More than two in five regional mid-market companies (42%) cite heightened costs, including energy bills, labour and raw materials, as one of their biggest barriers to growth in the next six months. Given the current conflict in the Middle East, this is likely to be exacerbated further.
Cashflow remains the most significant barrier to growth for almost half (48%) of businesses with access to funding cited as a top challenge for more than a third (39%).
Growth ambition depends on a stable financial environment
To fund expansion and manage rising costs, mid-market businesses are increasingly diversifying their sources of capital, with more than half (55%) looking to self-fund through the likes of bootstrapping, choosing not to rely on external support and working capital, while nearly two-fifths (39%) are considering asset-based finance.
Nearly three-quarters (70%) say their growth plans depend on financing conditions remaining stable or improving.
For more than half (58%), risk aversion from investors was a top challenge in accessing additional finance, as well as the business already being too leveraged (64%). The complexity and speed of the lending process was also highlighted as a top challenge by two-fifths (42%).
Phil Cliftlands, regional managing partner at BDO in the South East, said: “The South East mid-market should not be underestimated. These businesses are a powerhouse of our economy and clearly want to invest and grow.
“At the same time, businesses are navigating a highly uncertain global backdrop. The likelihood of significant further increases in fuel and energy prices, given the conflict in the Middle East, adds another layer of cost pressure at a time when margins are already tight.
“Whether these ambitions translate into sustained growth will depend on costs stabilising, borrowing conditions remaining supportive, and regional companies having access to a broad range of financing options that provide flexibility in an uncertain environment.
“Stronger access to capital is crucial if that investment is to materialise. This could include more financial incentives for investors to address persistent funding gaps for scaling companies, continuing momentum on the government’s new PISCES initiative and action to reduce the tax-led bias towards debt financing.”
