Increasing workforce costs and export barriers are threatening the growth of UK mid-sized firms. According to new research from BDO, which surveyed 500 business leaders representing companies with turnovers between £10m and £300m, the sector cited international trade challenges as the top concern over the next six months. Over a third, 34 percent, of these firms reported difficulties in exporting as their biggest hurdle, driven by delayed deliveries and shortages.
According to a poll by banking firm HSBC, this sentiment has only been heightened by potential new trade tariffs, which led 39 percent of UK businesses to hike prices. Among manufacturers, this rises to almost half (46 percent) of participants, underlying growing obstacles for UK firms aiming to expand overseas. Nearly half of respondents also said they need stronger government support to navigate international trade, including broader access to UK export finance, new free trade agreements, and streamlined customs rules.
Without the implementation of these measures, many firms face increasing difficulty competing on the global stage. Rising workforce costs are also placing significant strains on UK businesses. With increases in national insurance contributions and living wage set to take effect shortly, 26 percent of mid-sized businesses are concerned about the financial strain. According to a recent survey from KPMG and the Recruitment and Employment Confederation (REC), London firms are bracing for the impact of these changes, as recruitment activity continues to shortfall. Consequently, 28 percent plan to delay hiring, freeze recruitment, or scale back future workforce expansion.
Given these mid-sized businesses support around one in three private sector jobs in the UK, these constraints could have wider economic ramifications. Despite these challenges, mid-sized businesses remain focused on growth. One in three is investing in new technologies amid the AI boom, with 27 percent actively sourcing new capital to fund expansion. Yet, business leaders argue greater incentives are necessary to support skills development.
Richard Austin, partner at BDO said, “Five years on from the start of the Covid-19 pandemic, mid-market businesses continue to face uncertainty, particularly around international trade. These companies are the engine room of the UK economy, supporting one in three private sector jobs. Ensuring they have the right conditions to grow must be a priority for the government.”
This reflection on the distress of mid-sized businesses reveals the deep interconnectedness of UK firms with global trade dynamics. Any adverse shift, such as increased tariffs or cross-border delays, is likely to reverberate across the narrower lanes of domestic commerce.
paralleled by the U.S. experience with exports, the timber of resilience and industry advancement often softens the blow of trade restrictions. For example, with China imposing export bans on key materials, particularly germanium and gallium, U.S. optics manufacturers are grappling with increased prices, limited availability, and long lead times. This has made international supply chains even more convoluted, as many companies in the sector rely heavily on these materials for defense and other key applications.
Dave Shelton, president of AmeriCOM, highlighted the intricacies, noting, “We still depend on China for germanium ore, and we’re probably years away from developing alternative sources.” Prices for germanium have skyrocketed by approximately 75% since the first restrictions, which compound recovery efforts for industries deeply enmeshed with high-precision optics.
Further complicate matters, optic manufacturers are unable to significantly source rare-earth elements from alternative countries due to past sanctions and legislative encumbrances. This trade gridlock dovetails with rising strategic demands, especially since euromarket prices spiked, showcasing the difficulties of balancing between supply imperatives and innovative capabilities.
Looking forward, the U.S. hopes to adapt to these challenges, investing significantly toward recycling and the repurposing of existing materials. This innovative pivot is aimed at alleviating growing price pressures, ensuring operational flexibility within sectors dependent on these components.
Innovation within optics has not only yielded advancements beyond traditional materials, but bolstered prospects for collaborative international efforts, indicating potential shifts toward more self-sufficient supply chains. The future of these industries augurs competitive resilience but demands keeping pace with the transformation of global supply chains integral to both U.K. and U.S. economic foundations.
Despite all the hurdles posed by rising costs, international competition, and supply chain uncertainties, firms remain committed to adaptation and improvements to reinforce their foundations. The calamitous interplay between domestic growth policies and international trading conditions must be continuously addressed for sustained resilience moving forward.