Scottish mid-sized businesses are reporting stronger-than-expected performance in 2025, fuelled by greater access to finance and AI adoption, according to a survey.

BDO’s latest Economic Engine research of more than 500 mid-sized business leaders shows nine in 10 (94%) have already beaten growth targets set at the start of the year, with more than a third (34%) saying they have significantly exceeded expectations. 

Greater access to investment or finance (40%) and resilient customer demand (43%) were key drivers of outperformance, supported by productivity gains from technology and AI (49%).

This positive trading picture is translating into continued capital commitment. Three-fifths (60%) are holding investment steady, with more than a third (36)% stepping it up. Only 4% are delaying or scaling back UK investment.

These figures suggest companies are backing their own pipelines and balance sheets, even as wider economic sentiment remains subdued.

Despite their strong performance, confidence in the UK as a place to grow remains limited for some Scottish businesses. More than half (58%) of mid-sized companies surveyed describe the UK as a “strong environment” for long-term business growth, while 42% say conditions have become more challenging. One in five (20%) are already shifting operations or investment overseas.

That caution reflects persistent structural pressures. On workforce issues, more than a quarter (28%) cite plugging skills gaps as their biggest challenge. Rising wage expectations are another significant pressure (22%), reflecting the ongoing effects of inflation and higher National Insurance contributions. 

Operationally, managing supply chain disruption is one of the most pressing barriers to growth (32%). At the same time, while AI is seen as a driver of productivity, one in five Scottish companies (20%) cite adopting new technologies as a challenge, highlighting the uneven pace of digital transformation across the mid-market. 

To fuel their growth, Scottish mid-sized businesses are looking to form strategic partnerships, such as joint ventures and supplier collaborations (50%) and entering new markets, whether in the UK or overseas (44%). A further 46% are planning to expand their physical footprint.

Martin Gill, regional managing partner at BDO in Scotland, said: “These findings highlight the strength of Scotland’s mid-market – businesses are delivering growth and continuing to invest despite challenging conditions. But they also carry a warning; confidence in the UK as a place to scale is not guaranteed.

“With mid-sized businesses continuing to contribute significantly to the Scottish economy, creating a wealth of additional jobs to boost the future outlook in Scotland, the government will want to use the Autumn Budget to reassure this segment of the market and address persistent barriers around skills, costs and competitiveness.

“Only with the mid-market firmly and confidently anchored in Scotland, will we see the growth the economy needs.”

CBI sees modest fall

The BDO research follows a less optimistic outlook from the CBI’s Growth Indicator which says firms across the private sector expect activity to fall modestly in the three months to November, extending a run of negative predictions that began in late 2024.

The downturn is expected to be broad-based, with business volumes in the services sector set to decline (-15%), driven by weak expectations in business & professional services (-13%) and consumer services (-22%). 

Distribution sales (-19%) and manufacturing output are also set to contract (-13%). Nonetheless, expectations across most sectors are less weak than those seen in the first half of the year. 

The fragile outlook comes as private sector activity fell in the three months to August (-26%). All sub-sectors reported falling activity.  

Alpesh Paleja, CBI deputy chief economist, said:  “The outlook remains subdued across the private sector, as businesses continue to grapple with sluggish demand, higher employment costs, increasing uncertainty, and squeezed margins. 

“However, expectations for activity are less negative than in the first half of the year, which is a thin silver lining.”