The firm’s bi-monthly Economic Engine survey of 500 mid-market businesses – companies with revenues between £10 million and £500m – shows that more than half (55%) identified winning new UK-based customers and contracts as one of their top growth opportunities over the next year. A similar number plan to launch new products or services to drive expansion.

Investment intentions remain strong, with the majority aiming to increase their investment in the UK over the next 12 months.

Cost pressures and access to finance remain the biggest brake on growth

Despite these ambitions, Scottish businesses are facing major challenges around cost pressures and access to finance. More than half of mid-market companies (55%) cite heightened costs, including energy bills, labour and raw materials, as one of their biggest barriers to growth in the next six months. Given the current conflict in the Middle East this is likely to be exacerbated further.

Access to funding also remains a significant barrier to growth for half, together with cashflow pressures (43%) and the cost of borrowing (32%).

Growth ambition depends on a stable financial environment

To fund expansion and manage rising costs, mid-market businesses are increasingly diversifying their sources of capital, with nearly half (49%) exploring private equity and venture capital investment and more than a third (36%) considering asset-based finance.

While 43% of companies report that they already have sufficient funding in place for the next 12 months, a similar number say their growth plans depend on financing conditions remaining stable or improving.

For more than two-fifths (43%), risk aversion from investors was a top challenge in accessing additional finance, with a similar number citing the complexity and speed of the lending process. Tighter lender criteria and credit availability were also deemed a top challenge for almost two thirds (62%).

Mark McCluskey, regional managing partner at BDO in Scotland, said: “The Scottish mid-market should not be underestimated. These businesses are a powerhouse of our economy and clearly want to invest and grow.

“At the same time, businesses are navigating a highly uncertain global backdrop. The likelihood of significant further increases in fuel and energy prices given tensions in the Middle East, adds another layer of cost pressure at a time when margins are already tight.

“Whether these ambitions translate into sustained growth will depend on costs stabilising, borrowing conditions remaining supportive, and Scottish companies having access to a broad range of financing options that provide flexibility in an uncertain environment.

“Stronger access to capital is crucial if that investment is to materialise. This could include more financial incentives for investors to address persistent funding gaps for scaling companies, continuing momentum on the government’s new PISCES initiative and action to reduce the tax-led bias towards debt financing.”