As the UK economy steps into 2026, mid-market businesses—those with turnovers between £25 million and £500 million—are displaying renewed vigor, setting a positive tone for the year ahead. According to recent insights from NatWest Group, these companies are entering the new year with heightened confidence compared to late 2024, bolstering projections for sustained economic expansion.
This uptick in sentiment, while not reaching the peaks seen in October of the previous year, outpaces the broader national trend and signals resilience amid ongoing challenges.
The NatWest UK Business Growth Tracker, a key barometer of private sector performance, climbed to 55.3 in December from 54.3 the month prior, firmly above the 50 threshold that denotes expansion.
This growth was widespread, with the services sector leading the charge at an index of 56.0, while manufacturing followed at 51.1.
Factors driving this momentum include stronger order inflows, the introduction of innovative products and services, and the acquisition of new clients.
For mid-market entities, this translated into a complete quarter of rising new orders, reflecting robust sales pipelines and adaptive strategies that helped navigate uncertainties, such as those stemming from the late-November 2025 Budget.
However, the picture isn’t uniformly rosy. Employment trends reveal some caution, with overall job numbers dipping across the board.
Smaller and medium-sized enterprises (SMEs) have endured 15 consecutive months of workforce reductions, though the pace eased slightly in December.
Mid-market firms also implemented modest cuts, but with a softening in the contraction rate.
Despite these adjustments, many businesses are eyeing recruitment as a pathway to capitalize on anticipated opportunities.
Cost pressures remain a persistent hurdle, particularly for SMEs, where input price inflation accelerated to its quickest rate since April 2025.
This has prompted the steepest increases in output charges in five months for SMEs and four months for mid-market players.
Elevated expenses for labor and materials continue to weigh on operations, yet there’s optimism that declining inflation throughout 2026 could alleviate these burdens.
Sector-wise, services emerged as the primary driver of progress, while manufacturing and construction showed gains in confidence among SMEs.
In contrast, service-oriented SMEs experienced a dip in optimism to an eight-month low, influenced by Budget-related delays in customer decisions and subdued demand.
NatWest’s Chief Economist, Sebastian Burnside, highlighted the shift:
“Business leaders are approaching 2026 with increased assurance, anticipating improved market sentiment that could boost workloads. Mid-market firms, in particular, are more upbeat than at year’s end, sustaining solid sales growth despite Budget-induced hesitations. While SMEs face tough conditions, prospects for easing inflation offer hope.”
Andy Gray, Managing Director of Commercial Mid-Market at NatWest, emphasized the segment’s economic clout:
“These businesses are vital to UK growth; even a 1% uptick could contribute £35 billion in gross value added by 2030.”
The outlook is encouraging, with mid-market agility poised to harness a potential economic rebound. As private sector advancement increasingly relies on these dynamic players, their confidence could prove pivotal in steering the UK toward stronger activity in 2026.