Yorkshire mid-market businesses are eyeing growth in 2026, turning to AI and productivity to support expansion plans.
According to the latest research from BDO, productivity improvements and incorporating technologies like AI will play a vital role in helping mid-sized companies achieve their growth ambitions in the next 12 months, with more than two-fifths of regional business leaders (46%) ranking it as one of the main sources of growth in 2026.
In a survey of 500 mid-sized business leaders, entering new international markets (43%), together with growth from existing customers (46%), were also identified as key growth drivers for Yorkshire businesses this year.
Businesses are making hiring plans but remain cautious
Against a backdrop of weakening business confidence and a subdued jobs market across much of the wider economy, the regional mid-market appears to be bucking the trend, with the majority of companies (73%) looking to build on their investment plans by increasing headcount in 2026. However, mid-sized businesses remain cautious, with more than three-fifths (68%) only expecting headcount to grow by up to 10%.
The hiring intentions of regional businesses mirror separate BDO analysis suggesting that mid-sized businesses could add an additional 1.9 million jobs by 2028, bringing total mid-market employment to 9.9 million and reinforcing the role these businesses play in driving UK employment growth.
Investment in new capabilities, such as technology and AI, is driving headcount increases for more than a quarter (26%) of regional businesses – companies looking for staff with relevant skills in areas such as AI, data and digital transformation. A strengthened financial position, or securing new funding, is another factor driving growth in recruitment for 44% of those surveyed.
Funding plans show improving outlook amid persistent challenges
Looking ahead, more than a third of Yorkshire mid-market businesses (38%) are considering private equity or venture capital to fund their growth plans in 2026. A further 30% are looking to existing shareholders for investment, while nearly two-fifths (38%) are considering listing on capital markets.
Despite the cautious optimism for growth and investment, business leaders in the region remain mindful of the challenges ahead. Rising business costs are one of the top concerns for nearly a third (32%) of Yorkshire businesses, with regulation and compliance also one of the biggest risks to business performance in 2026 for 27% of regional companies.
Dan Brookes, partner at BDO in Yorkshire, said: “It’s fair to say that current economic conditions remain challenging for Yorkshire businesses, with high costs and reports of weakening business and consumer confidence influencing hiring and investment decisions. However, regional mid-market businesses remain resilient and, despite erring on the side of caution, the growth ambitions of mid-sized businesses in Yorkshire have set down a marker for 2026.
“The mid-market is the UK’s economic engine – it is key to unlocking growth, but cost pressures still loom large. Turning ambition into delivery will depend not just on business strategy, but on whether the wider operating and policy environment allows the mid-market to do what it does best: invest, grow and create jobs.”
Hedgehog lab is a digital product consultancy which provides AI delivery and product design and development for household name brands. With ambitious growth plans for 2026, the Newcastle-headquartered company has operations in London, Leeds, Edinburgh and Sofia, Bulgaria.
In 2023, the business secured funding from the UK and Ireland’s most active growth capital investor, BGF, to accelerate expansion and has since acquired complementary businesses to expand its reach and capabilities.
Malcolm Seagrave, MD at hedgehog lab, said: “We have ambitious plans for the year ahead on the back of a period of strong growth. We’ll continue to invest in talent and emerging technology so we can continue to innovate and expand our market share.
“Businesses are operating in an uncertain environment and management teams are being entrepreneurial when it comes to creating value and driving growth – whether that’s investing in AI, attracting external investment or looking at M&A.
“We acquired Label Sessions in Edinburgh at the end of last year to create an innovation consultancy that will help organisations across sectors like finance, travel, retail and technology to take ideas from concept to pilot and then develop scalable AI products. While buy-and-build isn’t our primary growth strategy, with a supportive investor like BGF, we are able to be open to opportunities.”
Findings are based on a survey of 500 C-suite executives in UK mid-market businesses (revenue £10m–£300m). Fieldwork took place between 11 and 23 December 2025. Some questions allowed multiple responses.
The employment projections referenced in this release draw on separate BDO-commissioned economic analysis published in March 2025, which forecasts that mid-sized UK businesses could create an additional 1.9 million jobs by 2028, taking total mid-market employment to 9.9 million.
The full research, Mid-sized firms to contribute £745 billion to UK economy by 2028, is available here: https://www.bdo.co.uk/en-gb/news/2025/mid-sized-firms-to-contribute-745-billion-to-uk-economy-by-2028
