Middle Market Business Leaders Cautiously Optimistic Despite Continued Uncertainty

Rhea-AI Summary

Citizens Financial Group (CFG) has released new research showing middle market business leaders maintain cautious optimism despite economic challenges heading into 2025. The survey reveals that 83% of leaders believe their businesses are in a better financial position than last year, with 56% planning to increase hiring and 57% intending to invest more in growth compared to 2024.

Key concerns identified include inflation (59%), interest rates (44%), and tariffs (42%). Workforce challenges remain significant, with 84% of leaders prioritizing recruitment and retention. Companies are responding through increased employee training (39%), automation/AI adoption (38%), and workplace culture improvements (36%).

The research also highlights that 87% of business leaders plan to technology investments, focusing on AI and automation. Additionally, 76% view private equity as a current or future funding source, while many seek support for green initiatives and sustainable debt issuance.

Positive

• 83% of leaders report better financial position than previous year
• 57% plan to increase growth investments compared to 2024
• 56% expect to increase hiring in 2025
• 87% planning technology investments in AI and automation
• 76% see private equity as funding source, up from 72%

Negative

• 59% concerned about inflation impact on financial performance
• 84% facing significant recruitment and retention challenges
• 87% expect workforce challenges to impact growth over next 3-5 years
• Rising labor costs affecting 31% of companies
• Multiple economic headwinds: interest rates (44%), tariffs (42%), market volatility (39%)

New data from Citizens captures how middle market companies are responding to economic and policy headwinds into 2025

PROVIDENCE, R.I.--(BUSINESS WIRE)-- Middle market leaders are navigating uncertainty while poised to make key longer-term investments in technology, talent, and growth according to propriety research on the views of C-Suite executives released by Citizens today.

“Business leaders came into the year with a generally upbeat feeling about the economy, and that sentiment remains, despite macroeconomic volatility,” said Don McCree, senior vice chair and head of commercial banking, Citizens. “As businesses navigate an evolving market and regulatory backdrop, our experienced bankers stand ready to help clients anticipate challenges and achieve their goals.”

The two surveys, which surveyed middle market business leaders between January and February, were designed to capture the challenges and opportunities for middle market businesses in 2025 and beyond:

• The Citizens Business Leaders Survey polled decision makers at mid-size U.S. businesses about their outlook for economic conditions and assessment of key business inputs in the year ahead and;
• The Middle Market Business Challenges Survey highlighted challenges that middle market companies face as it relates to workforce development and sustainability.

Concerns Persist But Businesses Plan to Hire and Invest More in 2025

The Business Leaders Survey found middle market companies are heading into 2025 fully aware that uncertainty isn’t going anywhere - but they’re not sitting still. More than half (56%) of middle market business leaders expect their companies to hire more personnel this year, while 57% plan to invest more in growth than they did in 2024. Only 10% of leaders expected their organization to reduce personnel in 2025.

The results underscore a sense of cautious optimism about the business outlook for 2025, as 83% of leaders believe their business is in a better financial position now than it was a year ago - an outlook that stands in sharp contrast to the broader economic indicators dominating headlines.

The willingness to invest comes even as inflation, interest rates and tariffs weigh heavily on decision making. While inflation was the number one concern for business leaders, at 59%, a plethora of other factors gave leaders pause. Respondents identified interest rates (44%), tariffs (42%), financial market volatility (39%), a possible recession (34%) and increased taxes (33%) as other key factors representing the greatest risk to companies’ financial performance in 2025.

These mixed signals - spending and hiring in the face of mounting risks - reflect a middle market segment that’s neither bullish nor bearish, but pragmatic: betting that investments in technology, talent and operational resilience will help them navigate whatever comes next.

Workforce Challenges Are Myriad, But Benefits Significant

Attracting and keeping the right people has become a full-time job for middle market leaders, with 84% saying recruitment and retention are a top or high priority and 87% expecting workforce challenges to directly impact their growth over the next 3-5 years. Hiring and keeping talent is a multi-front battle. Leaders say competition from other companies (32%), a lack of qualified/skilled candidates (31%), rising labor costs (31%) and a lack of candidates with necessary soft skills (30%) are the top challenges they’re facing. Once talent is in the door, skills gaps (31%), compensation pressures (30%) and limited training resources (27%) are making retention difficult.

Middle market companies are throwing everything they have at the talent problem - increasingly, that means investing in both people and technology. Nearly two in five (39%) are putting more resources into employee training and development to improve retention and recruitment, while 38% are turning to automation or AI to ease the pressure when hiring falls short. 36% are doubling down on workplace culture and employee engagement, while only one-third (33%) said that they were offering higher wages and better benefits - a clear acknowledgment that competing on pay alone isn’t enough in a competitive market.

These workforce investments are delivering real returns. Nearly two-thirds (63%) of middle market companies said that they’ve seen essential or substantial benefits, including improved employee engagement and satisfaction (46%), enhanced innovation and creativity (44%) and higher retention/reduced turnover (37%).

Other notable findings from the two surveys include:

Private equity is becoming a fixture in the middle market playbook. This year, 76% see private equity as a current or future source of partnership and funding, up from 72% last year.

Companies welcome help navigating the transition to a lower-carbon economy: 39% are looking for M&A support focused on climate tech solutions and green entities. More than one-third are also seeking green/sustainable debt issuance (37%) and project finance (35%) to fund their climate initiatives. Beyond financing, some companies are increasingly looking for advisory support (32%) and access to environmental commodities such as carbon offsets (32%).

Technology investment remains a top priority as AI proliferates. 87% of business leaders plan to invest in technology this year, with AI and automation driving the agenda. Companies are prioritizing upskilling efforts, with cybersecurity (42%), generative AI (40%), and AI/Machine Learning (37%) as the top hard skills they want to see employees develop.

Methodology:

Citizens Business Leaders Survey: Business leaders at 502 middle market U.S. businesses who are directly involved in corporate decision-making completed a web-based survey in February 2025.

Citizens Middle Market Business Challenges Survey: C-level executives at 250 middle market U.S. businesses completed a web-based survey between January and February 2025.

Citizens is a trusted strategic and financial adviser, consistently delivering clear and objective advice. The Citizens approach puts clients first by offering great ideas combined with thorough market knowledge and excellent execution, to help our clients enhance their business and reach their potential. For more information, please visit the Citizens website.

About Citizens Financial Group, Inc.
Citizens Financial Group, Inc. is one of the nation’s oldest and largest financial institutions, with $217.5 billion in assets as of December 31, 2024. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. Citizens helps its customers reach their potential by listening to them and by understanding their needs in order to offer tailored advice, ideas and solutions. In Consumer Banking, Citizens provides an integrated experience that includes mobile and online banking, a full-service customer contact center and the convenience of approximately 3,100 ATMs and approximately 1,000 branches in 14 states and the District of Columbia. Consumer Banking products and services include a full range of banking, lending, savings, wealth management and small business offerings. In Commercial Banking, Citizens offers a broad complement of financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, interest rate and commodity risk management solutions, as well as loan syndication, corporate finance, merger and acquisition, and debt and equity capital markets capabilities. More information is available at www.citizensbank.com or visit us on X (formerly Twitter), LinkedIn or Facebook.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250312502480/en/

Frank Quaratiello

617.543.5810

frank.quaratiello@citizensbank.com

Source: Citizens Financial Group, Inc.

FAQ

What percentage of middle market companies plan to hire more employees in 2025 according to Citizens' survey?

56% of middle market companies plan to increase hiring in 2025, while only 10% expect to reduce personnel.

What are the top economic concerns for CFG's middle market business leaders in 2025?

The top concerns are inflation (59%), interest rates (44%), tariffs (42%), financial market volatility (39%), possible recession (34%), and increased taxes (33%).

How are middle market companies addressing workforce challenges according to Citizens' survey?

Companies are investing in employee training (39%), implementing automation/AI (38%), improving workplace culture (36%), and offering better wages/benefits (33%).

What percentage of middle market leaders plan to invest in technology in 2025?

87% of business leaders plan to invest in technology, with focus on AI and automation.

How many middle market companies view private equity as a funding source according to Citizens' research?

76% of middle market companies see private equity as a current or future source of partnership and funding, up from 72% last year.