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 Financial Group.

“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.