UK mid-market businesses recorded their fastest growth in almost two years in September, while employment rose at its strongest pace over the same period, according to NatWest’s mid-market growth tracker.

The tracker’s purchasing managers’ index (PMI) climbed to 56.2 in September from 52.4 in August, its highest reading since November 2024 and the third consecutive month above the 50 mark separating growth from contraction.

Services led the recovery, with activity rising at its fastest pace for more than 18 months, while manufacturers reported a moderate increase in production. Businesses cited stronger demand for technology services, improving sales opportunities and reduced risk aversion among clients, although geopolitical tensions, weak economic conditions and pressure on consumer budgets continued to weigh on demand.

Employment also increased at its fastest rate in 22 months, as companies responded to improving business requirements, new projects and plans to expand capacity.

Sebastian Burnside, NatWest’s chief economist, said: “September’s business activity scores are further evidence of stronger growth for UK business in Q3, as the economy has beaten expectations for much of this year. Mid-market output rose at its fastest pace for almost two years, with the headline index climbing to 56.2, led by a particularly robust recovery in services.”

Conditions for small and medium-sized enterprises (SMEs) also improved, with their activity index rising to 49.8 from 47.8 in August. This was just below the threshold for growth and represented the mildest contraction since the current downturn began in November 2025. Employment fell at its slowest pace since February.

Business confidence remained positive, although optimism among SMEs eased to its lowest level since June. Mid-market firms were more upbeat, with expectations for the year ahead reaching their second-highest level since March.

Export prospects were also encouraging, with 34% of businesses expecting overseas orders to increase over the next 12 months, compared with 13% anticipating a decline. Manufacturers were particularly optimistic, with 40% forecasting stronger export sales. Around 7% of respondents identified demand for artificial intelligence and data centres as a potential source of export growth.

NatWest’s The Middle Speaks report estimates that mid-market firms generate around £1.2trn in turnover and employ 7.3 million people across the UK. However, it found that 55% identify talent and leadership development as a major barrier to growth, while 42% cite recruitment and workforce capability as challenges likely to constrain expansion.

Andy Gray, managing director of commercial mid-market at NatWest said: “There is a growing sense that the UK’s mid-market is gaining momentum. As the UK's leading bank for the mid-market, we hear from our customers that businesses are seeing opportunities emerge, committing to new projects and looking again at how they can invest for future growth.

"While the wider environment remains complex, with cost pressures and geopolitical uncertainty continuing to shape decision-making, what is encouraging is that businesses are looking beyond those immediate challenges, with investment in productivity, technology and new products helping them position for the opportunities ahead.”

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