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RSM UK Middle Market Business Index (MMBI) Q3 update: Businesses dialling down on recruitment and investment amid recession warnings and policy confusion

  • Faltering demand and rising inflation means middle market firms are dialling down their hiring needs with just 33% of firms recruiting more staff, down from 41% in Q2, and 52% in Q1.
  • Appetite among middle market firms to increase capital expenditure fell from 38% in Q2 to 34% in Q3 casting long shadows on the level of business investment in the next 6 months.
  • The overall MMBI dropped for the 3rd consecutive quarter from 120.9 in Q2 to 109.2 in Q3.

Middle market businesses are dialling down on their people and business investment as soaring inflation, escalating energy prices, falling consumer demand, monetary policy confusion and geopolitical pressures erode confidence. 

RSM UK’s latest Middle Market Business Index (MMBI), the first economic index to focus solely on middle market* businesses in the UK, shows a sharp fall in the proportion of firms hiring more staff – down from 41% in Q2 to 33% in Q3.

The quarterly index and survey** of approximately 700 senior executives at middle market companies also shows the number of businesses planning to increase capital expenditure over the next six months dropped from 55% in Q2 to 42% in Q3.

Paul Anthony, regional managing partner, RSM South, said: ‘The UK has the lowest business investment in the G7 and it is still almost 10% below its 2016 level. Business investment in the US, by contrast, is 25% higher than it was in 2016. This is a key reason why productivity growth in the UK has been so poor over the last decade.

‘The surge in borrowing costs as a result of the recent fiscal stimulus will make it much more expensive for businesses to finance capital projects, which will weigh heavily on business investment over the next few years. Financial markets are now expecting interest rates to reach 5.5% by this time next year. As there is very little evidence that lower corporation tax feeds into higher business investment, we are anticipating a 3% drop in business investment next year.

‘What’s more, as the focus moves from tax cuts towards spending cuts, government investment is likely to take the brunt of efforts to get the public finances on a more sustainable footing. That could further reduce the incentives for businesses to invest.

‘Investment into stimulating business activity and providing energy cost support need to be prioritised by the Prime Minister and her cabinet. The energy price cap will significantly reduce inflation in the short-term, but energy prices were only frozen for businesses for six months. Given that electricity prices in April 2023 are currently around £360 per MWh, this could represent a cliff edge in spring after what will undoubtedly be an exceptionally tough winter. That risks productive investment being deferred or cancelled and otherwise viable firms going bust, making the economy permanently smaller.’

The survey also found the weaker economic outlook was impacting negatively on the revenues of more middle market businesses in the current quarter with 36% of firms now reporting lower revenues, compared with 27% in Q2.

There was also a significant drop in growth expectations over the next six months with the number of firms expecting their revenue to rise over the next six months down from 59% to 44%, the first time it has fallen below 50%.  Similarly, only 32% of businesses said they managed to increase profits in the current quarter, and 44% said they expect to do so over the next six months.

Developed in partnership with leading data specialists Moody’s Analytics and The Harris Poll, the quarterly index also showed a significant drop from 120.9 in Q2 to 109.2 in Q3 in the headline index data – the third consecutive quarterly drop. However, the index remains above 100 suggesting that the middle market is still growing*** albeit slowly.

Paul Anthony continues: ‘The sharp deterioration in economic conditions over the last three months and the dramatically darker outlook for the rest of 2022 and into 2023 is clearly the issue that is most concerning middle market firms in the third quarter.

‘Surging energy prices and inflation mean that real disposable income will suffer its biggest ever squeeze with the inevitable result that discretionary consumer spending will continue to fall all as an ever-greater share of households’ finances are diverted towards the cost of living, leading to a recession at the end of this year and an extended period of weak growth.’

RSM’s MMBI presents unique insight into the health of the middle market – the engine room for growth in the UK – whilst drawing on credible forward-looking indicators to deliver predictive economic insight over a six-month period.

For further information and to view the report visit the MMBI homepage  

* The middle market is defined here as companies with annual revenues of £10 million to £750 million. There are close of 33,000 firms in the UK that fall into this category, accounting for 10 million jobs and one-third of private company turnover.

**The quarterly survey, conducted from 5 July to 26 July 2022, comprises 20 tracker questions to a panel of approximately 700 senior executives at middle market companies to gain their opinions on current and future business conditions.

***Index readings above 100 indicate economic expansion and below 100 indicate contraction.

The RSM UK Middle Market Business Index (MMBI), developed in partnership with leading data specialists Moody’s Analytics and The Harris Poll, is the first economic index to focus solely on middle market businesses in the UK. Launched in March 2022, the first-of-its-kind quarterly index presents a unique insight into the health of the middle market, whilst drawing on credible forward-looking indicators to deliver predictive economic insight over a six-month period. For further information visit

RSM is a leading audit, tax and consulting firm to the middle market with 3,660 partners and staff operating from 32 locations throughout the UK. For the year ending 31 March 2021, RSM generated revenues in excess of £376m. RSM UK is a member firm of RSM International – the sixth largest network of audit, tax and consulting firms globally. The network spans more than 120 countries, over 860 offices and more than 51,000 people, with global revenues of $7.26 billion (US).

Moody’s Analytics supports firms and policymakers in strategic planning, product and sales forecasting, credit risk and sensitivity management, and investment research. Their economic research publications provide in-depth analysis of the global economy, including the U.S., all European countries, Asia, and the Americas. Moody’s Analytics tracks and forecasts economic growth and covers specialised topics such as labour markets, housing, consumer spending and credit, output and income, mortgage activity, demographics, central bank behaviour, and prices. Clients include multinational corporations, governments at all levels, central banks, financial regulators, retailers, mutual funds, financial institutions, utilities, residential and commercial real estate firms, insurance companies, and professional investors.

The Harris Poll is a global consulting and market research firm that strives to reveal the authentic values of modern society to inspire leaders to create a better tomorrow. It works with clients in three primary areas: building twenty-first-century corporate reputation, crafting brand strategy and performance tracking, and earning organic media through public relations research. One of the longest running surveys in the U.S., The Harris Poll has tracked public opinion, motivations, and social sentiment since 1963, and is now part of Stagwell, the challenger holding company built to transform marketing.

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