The RSM UK Middle Market Business Index (MMBI) has fallen dramatically – from 134.9 in the first quarter of 2022, to 120.9 in the second quarter. It’s the clearest signal yet of the damaging effects on the middle market from the war in Ukraine, surging inflation, struggling supply chains and weakening demand.
However, at well above 100 the MMBI still suggests that many middle market businesses remain optimistic. The forward-looking aspects of the survey show that, while businesses are less optimistic than they were in Q1, most still expect key metrics, such as revenue and profits, to improve over the next six months.
Although we do not expect a recession, it will be little comfort if the economy significantly weakens. We think that the economy may only be 1% bigger in 2023 than it was in 2019, before the pandemic. That means the economy will probably be about 6% smaller in 2023 than if it had continued to grow at its ten-year average of around 2%.
Key takeaways – Q2/2022
- The deteriorating economic outlook is the middle market’s most pressing concern. 50% of firms said the economy worsened in Q2
- Price pressures remain high, which is squeezing margins, but there are early signs that the labour market is cooling
- One of the most important things that the middle market can do to thrive in this tough economic environment is invest in productivity-enhancing equipment
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