The latest data from the International Business Report (IBR), Grant Thornton’s global survey of mid-market companies, shows that business leaders plan to increase investment over the next 12 months.

Despite firms in many countries dealing with the highest interest rates they have seen in years (making credit more costly), investment intentions are up in every category compared to last year.  

Globally, more than half of firms we surveyed expect to increase investment across technology, research and development (R&D) and staff. The growth in investment echoes, and is likely a result of, the rise in optimism among mid-market firms. Technology is the area most firms plan to invest in, with 61% of mid-market firms expecting this to happen over the next 12 months, up from 57% in the second half of 2022. 

“Traditionally, investment in technology was led by larger firms with deeper pockets, and the productivity gains came later down the line. But now, technology is accessible to companies of all sizes, and this has largely been driven by the rise in the use of the cloud. For mid-market firms in particular there are huge opportunities available.  

“The most notable benefit of investing in technology for these firms is the additional productivity gains from better data and the automation of business processes. With employment costs rising, automation offers a clear way to reduce labour costs. Firms are faced with a decision to either invest in technology or outsource to a cheaper jurisdiction, with many choosing the former due its greater longevity.  

“Artificial intelligence amplifies this process, replacing what gets done by humans and getting it done quicker, allowing mid-market firms to make scalable improvements. Ethical concerns, however, are already starting to come to the fore with AI, and we are yet to see how these anxieties may lead to greater regulation and limitations on businesses’ use of this transformational tech.” - Nick Watson, Partner, Global head of technology, Grant Thornton UK 

Energy firms reinvesting bumper profits in technology

The most significant increase in investment intentions is taking place in the energy sector, with oil and gas firms being the most likely to increase investment.

Three in every four (75%) mid-market oil and gas businesses expect to boost investment in technology this year, a significant jump from just one in three (31%) planning to do so at the end of last year. Given a prolonged period of higher profits arising from the surge in oil and gas prices, it is unsurprising that businesses within these sectors now have more funding to invest in technology. In comparison, only one in three (33%) of oil and gas businesses are increasing their investment in new buildings, and only 43% are increasing investment in plants and machinery. 

Mid-market energy firms’ increased investment in technology indicates how the sector is innovating, with more firms looking to realise the potential of renewable and sustainable energy sources through investment in new technologies. At the same time, leaders continue to prioritise investment in areas most likely to deliver long-term value. Oil and gas firms are using this technology investment to increase efficiencies, reduce gas extraction costs, automate drilling costs, improve worker safety, and improve supply chain management.  

“Most oil and gas firms have benefited from significantly increased profits over the last year, and now they are looking at how they can put these earnings to good use. Many mid-market firms are currently reinvesting their profits into further oil and gas exploration to find additional reserves. Typically, the returns on investment in oil and gas are 15-20% in comparison to renewables which are closer to 8%.  

“However, pressure from consumers and governments across the world are changing this trend, driving clean growth in the form of hydrogen, wind, solar, nuclear and numerous other forms of renewable energy. We can especially see this in Texas, for example, which has become the number one state in the US for the amount of power generated by wind, with Houston positioning itself to be a global leader in carbon capture.” - Bryan Benoit, Global head of energy and natural resources and Global co-leader valuation services, Grant Thornton US 

Mid-market firms embrace innovation to stay competitive 

Despite rising costs and persistent economic uncertainty, businesses are increasing investment in research and development (R&D). Globally, this has risen slightly from 51% at the end of last year to 54% this year, significantly higher than it was pre-pandemic (45% in the first half of 2019). Mid-market business leaders are demonstrating their focus on the future and desire to keep innovating to stay ahead of competitors and keep abreast of the fast pace of technological change.  

“Most mid-market firms invest because they want to take advantage of an opportunity or maximise productivity. Where there are gains to be made in productivity, many firms will accept the cost arising from the current high cost of finance, as the benefits on productivity will far exceed the finance cost for these firms.  

“Compared to 15-20 years ago, many businesses have accumulated significant cash reserves and are less reliant on external funders and are more capable of investing direct themselves. Coupled with this, there are many more innovative funding options available that present alternative funding structures compared to more traditional forms of bank debt. Therefore, whilst interest rates may intuitively discourage investment, businesses can still deliver on their investment plans owing to the funding options available that support a longer-term view to be taken.”  - David Munton, Global Leader, International capabilities and support, Grant Thornton International  

Constraints to investment

In ‘Smart investment’ we highlighted that at the end of 2022 poor access to cash was a real concern for businesses trying to fund investment. However, as 2023 has progressed, we have seen mid-market leaders become more confident that they can overcome shortage of finance. The percentage of respondents who regard this as a constraint to business growth dropped from 47% to 44%, the lowest it has been since the second half of 2019, before the pandemic.

However, with interest rates continuing to rise, access to debt funding remains costly, explaining why more than four in ten firms still see shortage of finance as a barrier. In September, the US Federal Reserve kept its benchmark interest rate at 5.25-5.5%, maintaining the rate at its highest level in 22 years. [i] The European Central Bank, meanwhile, raised the three key ECB interest rates by 25 basis points to 4-4.75%, an all-time high, although the central bank also signalled its cycle of increases was near its end. [ii,iii] Therefore, whilst finance is available, the cost of finance has made it harder for businesses to invest. 

Firms, however, have still found other ways to invest. This includes investing off balance sheet, using cash reserves accumulated during and post the pandemic to fund investment, while intervention and fiscal stimulus by governments worldwide has encouraged many firms to keep investing. 

Investing in the human side of business
Availability of skilled workers and labour costs

Availability of skilled workers and labour costs 

Globally, more than half of mid-market business leaders (53%) still view the availability of skilled workers as a barrier to growth. This has fallen by four percentage points since the end of 2022, but demonstrates that the majority of firms continue to struggle to find the right skills. In the US, there has been a significant decrease, dropping from 67% to 56%, yet more than half of US business leaders still see a shortage of skilled workers as a constraint on growth. Meanwhile in China, a growing number of firms are concerned about a lack of skills, with a 3% rise this year to 57%. 

Likewise, the percentage of respondents who view labour costs as a key constraint to business growth dropped from 55% in the second half of 2022 to 53% in 2023, suggesting that increased staffing costs have largely been taken into account in revised operating models.  

“In Singapore, a lot of the time we are very dependent on what is going on around the world especially in China, the United States or Europe. Business leaders here have to constantly keep an eye on what’s happening in those markets, because it will have an impact on us.   

“But, regardless of that, firms here are still attracting a lot of investments. There’s a large inflow of money coming into Singapore. I think this is partly because it’s seen as a stable base for firms, insulated from wider geopolitical tensions. We also have a business-friendly environment here, with the skills and the commercial atmosphere that supports entrepreneurs and those looking to grow.” - Emily Lai, Partner, Business risk, Grant Thornton Singapore  

Despite significant inflationary pressures, most mid-market firms intend to ensure the wages they pay keep up. Globally, seven in ten firms are planning to give pay rises in line with or above inflation. Employees in North America are most likely to get a real terms wage increase, with 27% of firms offering real increases. Similarly, in the UK, the most recent data shows that average pay growth has exceeded inflation for the first time in almost two years. [iv]


“With the availability of skilled workers still a major concern, there are important ways for mid-market firms to attract and more importantly retain talent.  More so than ever, the culture of the company plays an important role - this includes the brand, values, purpose of the company, team and work environment and relationships with colleagues. Employees are far more likely to stay and be advocates if they are, for example, being challenged, enjoy working with their team or given the flexibility for a work-life balance. It is increasingly not just about the pay packet” - David Munton, Global Leader – International capabilities and support, Grant Thornton International.



Investing in staff skills

Investing in staff skills  

Firms recognise the importance of investing in the skills development of their teams, ranging from training programmes to apprenticeships. This is one way that mid-market businesses can bring new skills into their teams, without having to make expensive hiring decisions.


The percentage of mid-market business leaders who expect an increase in investment in staff skills over the next 12 months is at 57%, this is just behind investment in technology (61%) but ahead of investment in R&D (54%), investment in plant and machinery (46%) and investment in new buildings (38%). The relatively low expectations for investment in buildings perhaps reflects broader changes in working practices, with the popularity of hybrid-working meaning many businesses need less space. 

The increase in investment in staff skills is being felt in almost every region, with North America seeing the largest increase from 60% in 2022 to 69% in the first part of 2023. The only region to see a fall is Latin America, dropping from 61% to 55%. Whilst EMEA still remains below the global average, it has increased slightly from 51% to 53%"  

“The Latin American region is a very good target for investment, with a huge population and low costs due to the currency and exchange rate. As Latin America moves its focus from industry to services, it is essential that mid-market firms focus on investing in people and skills. - Sabrina Lawder, International tax partner, Grant Thornton Brazil  

Although there has been a lot of focus on the possibilities offered by AI, investment in technology is not a substitute for investment in people, and mid-market businesses can benefit from investing in both. For example, according to a recent study from the UK Government, while many jobs face a high probability of automation, AI will also create numerous jobs through the boost it gives to productivity and economic growth. Some jobs will be in areas linked directly to AI and related technology, but many will be in relatively hard-to-automate services (e.g. health and personal care) that are in greater demand due to the additional real incomes and spending arising from higher productivity generated by AI. [v]

“In the long term, business leaders know that they need to have the skills within their firms so that they can make the most of new technologies. What leaders are trying to do is to retrain and reskill their people to stay competitive. This means ensuring that their people are comfortable in working with things like advanced data analytics, blockchain, and AI, in addition to possessing the core skills required of their role. 

“When I speak with clients right now, a lot of them are talking about bots. But many of them find that the people within their current teams do not have the relevant technology skills to operate them or do not understand the potential efficiencies that could be unlocked. Leaders know that if they don't start investing in these skills, they might be left behind because of the technology disruption.”
- Emily Lai, Partner, Business risk, Grant Thornton Singapore




Intelligent investment offers route to success for mid-market

The increase in optimism among mid-market business leaders has been accompanied by a stronger desire and expectation to invest overall. In particular, appetite to invest in technology, staff skills and R&D in 2023 is relatively high. This is coupled with a growing confidence in overcoming barriers to investment and a growing desire and capability to invest in the human side of business. It is, however, essential that businesses keep the right balance. With mid-market firms in many parts of the globe being exposed to the highest interest rates in over 10 years, this additional burden could drag businesses backwards if they overextend themselves to fund investment.

Many business leaders won’t have experienced an extended period of expensive credit and will need to ensure that they have a strong board and good advice to help them maintain investment in the areas that matter to them. With the right conditions in place for success, firms will be able to make the most of their investments, and plan for growth, both domestically and through trade with partners.

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    i. - Fed declines to hike, but points to rates staying higher for longer - 20.09.23
    ii. - Monetary policy decisions - 14.09.23
    iii. - ECB raises interest rates to all-time high - 14.09.23
    iv. - Wages overtake inflation for first time in nearly two years - 17.10.23
    v. - The Potential Impact of Artificial Intelligence on UK Employment and the Demand for Skills - 08. 21