Deteriorating economic outlook is leading middle market firms to reassess hiring needs with just 41 per cent of businesses increasing recruitment, down from 52 per cent in the first quarter, RSM’s Middle Market Business Index (MMBI) showed.

The quarterly survey of approximately 700 senior executives at middle market companies also showed a nine point drop to 54 per cent in the number of businesses planning to recruit more staff over the next six months – signs that the labour market is starting to cool.

In addition, the number of businesses planning to increase capital expenditure significantly dropped from 51 per cent last quarter to 38 per cent in the second quarter.

Thomas Pugh, economist at RSM UK, said: “With the perfect storm of headwinds facing middle market businesses it’s not surprising to see them cautiously take the foot off the gas when considering investing in staff and vital capital expenditure.

Mike Thornton, RSM UK’s office managing partner in Leeds.

“However, now is not the time to be cutting back on investment. As we emerge from the pandemic, businesses need to commit to enhancing productivity to stimulate the economy post-Covid.

“Despite the first signs of the labour market cooling, it will remain reasonably tight for the next few years, especially in sectors which were previously reliant on a higher proportion of workers from the EU. Most middle market businesses are still planning to recruit more in the second half of this year, but a reduction in some of the excess demand for labour, will take some of the heat out of a red-hot labour market and, in turn, reduce the risk of future interest rate rises.”

Mike Thornton, RSM UK’s office managing partner in Leeds, said: “The start to 2022 has been seismic for middle market businesses that continue to rise to the combined challenge of insufficient staff, soaring input prices, and, for many, supply chain disruption.”

Middle market firms reassess hiring needs as economic outlook deteriorates