Appetite for investment grows among mid-market leaders

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  

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