The UK’s mid-market firms continued to drive private sector expansion in the third quarter of 2025, showing resilience despite a softening in overall activity across the wider economy, according to new data from NatWest’s UK Business Growth Tracker.
The index, which surveys mid-market businesses across manufacturing and services, dipped from August’s 13-month high of 56.4 to 51.6 in September, signalling slower but still positive growth. By contrast, the broader UK private sector stagnated, with output barely above neutral at 50.1.
Mid-market growth remained concentrated in services, where activity registered 52.6, though this marked the weakest expansion in four months. Manufacturing output fell at the fastest pace in ten months, with an index reading of 46.4, reflecting persistent supply chain and demand headwinds.
“UK business confidence has been on a rollercoaster ride over the last three months, but mid-market firms rounded out the quarter in a solid position,” said Sebastian Burnside, Chief Economist at NatWest.
“It’s encouraging to see businesses reporting signs of cost pressures starting to ease, hopefully setting the scene for stronger growth into 2026.”
NatWest’s data shows that mid-market firms — typically employing between 50 and 500 people — continue to outperform both small businesses and large corporates as a group. While some firms cited new customer wins and recovering demand, others noted that subdued investment and soft consumer spending had constrained momentum.
Andy Gray, Managing Director of Commercial Mid-Market at NatWest, said: “The resilience and adaptability of the UK’s mid-market firms is clearly demonstrated, as they continue to drive growth even as broader market conditions remain mixed.
“While challenges persist, particularly for SMEs, it’s encouraging to see that mid-market businesses are showing elevated growth expectations and responding positively to easing cost pressures.”
The NatWest SME Business Activity Index, which tracks smaller firms in construction, manufacturing, and services, fell marginally from 47.1 to 46.9 in September, pointing to a continuing contraction in output. However, the decline in new orders was the least severe seen this year.
Construction and manufacturing SMEs reported the sharpest output drops, while service-sector SMEs showed only moderate contraction.
Employment also continued to weaken across the mid-market for a sixth consecutive month, although the overall level of job losses remained smaller than across the broader private sector. Among SMEs, employment fell for the twelfth straight month, though at a slower rate than earlier in 2025.
Input costs rose sharply again in September but at the slowest pace since November 2024, falling below the post-pandemic average. For SMEs, cost inflation was the second-lowest since December 2024, with all major sectors reporting slower price growth than in the first half of the year.
While business confidence eased from August’s ten-month high, both SMEs and mid-market firms remain upbeat about the year ahead. The mid-market Future Activity Index climbed back above its long-run average, signalling that optimism — though tempered — remains intact.
With inflation moderating and cost burdens easing, NatWest expects the mid-market to remain the “engine room” of UK growth as the economy transitions into 2026.
Read more:
UK mid-market demonstrates resilience as growth holds steady in Q3