Middle market business leaders are navigating economic uncertainty with a mix of caution and confidence, with a majority planning to hire and invest in 2025 despite ongoing concerns about inflation, interest rates, and regulatory changes, according to a new survey by Citizens.

The survey, which polled executives at mid-sized U.S. businesses between January and February, found that 56% expect to increase hiring this year, while 57% plan to invest more in growth compared to 2024. At the same time, only 10% anticipate workforce reductions. The findings highlight the balancing act these firms are managing—making long-term strategic moves while bracing for financial volatility.

“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 at Citizens.

Economic Concerns Weigh on Decision-Making

Inflation remains the top concern for middle market executives, cited by 59% of respondents. Other significant worries include interest rates (44%), tariffs (42%), financial market volatility (39%), and the possibility of a recession (34%). Despite these pressures, 83% of respondents said their companies are in a stronger financial position than a year ago, underscoring a sense of cautious optimism.

Rather than pulling back, many businesses are making strategic investments in technology, workforce development, and operational resilience to navigate future challenges. Nearly 87% of executives said they plan to invest in technology this year, with artificial intelligence and automation leading the way. Companies are also prioritizing cybersecurity (42%) and AI-driven efficiencies (40%).

Labor Market Pressures and Retention Strategies

Workforce challenges remain a significant hurdle, with 84% of respondents ranking recruitment and retention as a high priority. Executives cited competition from other companies (32%), a lack of qualified candidates (31%), and rising labor costs (31%) as their top concerns. To address these challenges, companies are investing in employee training (39%), workplace culture and engagement (36%), and automation to ease staffing pressures (38%).

While some firms are increasing salaries and benefits, only 33% view higher wages as a primary solution, indicating that companies see workplace culture and career development as essential for long-term retention.

Private Equity and Climate-Focused Investments on the Rise

The survey also highlighted a growing reliance on private equity, with 76% of executives viewing it as a current or future funding source, up from 72% last year. Additionally, businesses are increasing investment in sustainability initiatives, with 39% seeking mergers and acquisitions focused on climate technology and green projects.

Survey Methodology

The findings are based on two surveys: The Citizens Business Leaders Survey, which polled decision-makers at 502 middle market businesses, and the Middle Market Business Challenges Survey, which surveyed 250 C-level executives. Both surveys were conducted online between January and February 2025.