The UK mid-market has demonstrated resilience in the face of uncertain economic conditions, maintaining solid growth in the third quarter of 2025. This is according to the latest data from NatWest’s Mid-market Growth Tracker, which marks more than four-and-a-half years of expanding output levels.
The survey, which focuses on mid-market businesses in the manufacturing and services sectors, found that business activity growth was led by service providers in September. The report also noted elevated growth expectations among mid-market firms, aided by easing input cost inflation. However, small and medium-sized enterprises (SMEs) experienced another decline in business activity, although new orders fell to the smallest extent seen in 2025.
Despite some mid-market firms citing a tentative pick-up in market conditions and new customer wins as contributing factors to their growth, others mentioned subdued business investment and soft consumer demand as limiting factors. The services economy remained the driving force behind mid-market growth, although the expansion was the weakest in four months. In contrast, manufacturing output fell at a solid pace, the quickest in ten months.
While SMEs continued to face a challenging business environment in September, the decline in new orders was the least marked seen in 2025 so far. The NatWest SME Business Activity Index, which surveyed SMEs in the construction, manufacturing, and service sectors, fell slightly from 47.1 in August to 46.9 in September. SMEs in the construction and manufacturing sectors reported the sharpest declines in output volumes, while service providers indicated only a moderate pace of contraction.
NatWest’s Chief Economist, Sebastian Burnside, commented on the findings, stating that UK business confidence has been on a “rollercoaster ride” over the last three months but mid-market firms have ended the quarter in a solid position. He added that with so much changing on both domestic and international fronts, it is not surprising to see activity vary substantially from month to month. However, he also noted that it is encouraging to see businesses reporting signs of cost pressures starting to ease, potentially setting the stage for stronger growth in 2026.
Managing Director of Commercial Mid-Market at NatWest, Andy Gray, also highlighted the resilience and adaptability of the UK’s mid-market firms, noting that they continue to drive growth despite mixed market conditions. He added that while challenges persist, particularly for SMEs, mid-market businesses are showing elevated growth expectations and responding positively to easing cost pressures. Gray concluded by stating that NatWest remains committed to supporting businesses as they navigate the evolving economic landscape and seize new opportunities for expansion.
The report also found that across the mid-market, the overall volume of new work fell in September, marking the second reduction in three months. However, the contraction was only slight and a reversal of August’s solid upturn. Employment numbers at SMEs also decreased for the twelfth consecutive month in September, although the degree of job losses remained less marked than across the UK private sector as a whole. The level of employment across the mid-market economy was solid, marking the sixth reduction in successive months.
Cost burdens faced by mid-market businesses continued to rise sharply at the end of the third quarter, although the overall rate of cost inflation fell to its lowest since November 2024. At SMEs, overall cost inflation was the second-lowest since December 2024, with all three sub-sectors recording slower rates of cost inflation compared to the first half of the year. Despite optimism levels slipping from August’s 10-month high, SMEs remained confident about their own business prospects for the year ahead. Similarly, mid-market companies were also generally upbeat in September, with the Future Activity Index recovering back above its long-run average.
The report concludes by stating that while challenges remain, mid-market and SME businesses in the UK are showing resilience and adaptability, positioning them well for future growth.