Rising employment costs are adding to the pressure on the UK’s middle market, leaving businesses with limited headroom to invest and grow
Chancellor John Healey announced an increase in the National Living Wage of 3.9% to £13.21 an hour from April 2027, alongside a rise in business rates relief for eligible retail, hospitality and leisure businesses. While these measures offer support to workers and smaller high-street firms, mid-sized businesses continue to face rising employment costs without necessarily having the same financial headroom as larger corporations.
With higher wage bills and no comparable relief, Darren Cran, CEO of AccountsIQ, argues that mid-sized businesses should focus on how efficiently they use their resources, rather than letting rising costs dictate every decision:
“The UK Budget has offered crucial relief for households and some of the smallest high-street businesses, but this leaves the ‘forgotten middle’ exposed. While they’ve avoided fresh tax levies today, there isn’t any room to manoeuvre either.
“These firms can’t change what the Budget has or hasn’t delivered, but they can change how they respond. The businesses that come through this well will be the ones that know exactly where their money is going and are prepared to fix the processes that are quietly costing them.”
The National Living Wage has now risen 61% since the start of 2020, and the government estimates the latest increase is worth around £910 a year in gross earnings to a full-time worker, before employer National Insurance. With little control over external costs, Cran believes finance leaders face the challenge of protecting margins while ensuring preserving longer-term growth.
“The 3.9% increase in the National Living Wage is the right outcome for workers, but it adds to the cost pressures mid-sized firms must absorb while still finding headroom to invest and grow. These businesses employ a significant share of the UK workforce but fall into a dangerous blind spot, lacking both the scale of large corporations and the safety nets available to small businesses.
“Automation and better use of data can help reduce manual workloads, improve visibility and give finance teams more time to identify risks and opportunities across the business. Every hour taken out of manual processing is an hour finance can spend understanding the numbers and working with the rest of the business to spot risks and opportunities earlier.”
Technology is only part of the answer. The growing pressure to adopt AI presents its own challenge. With wage costs rising and no new relief on the way, the pressure on finance teams to turn to AI for productivity gains is only likely to grow. But Cran warns that adopting it without the right controls could add complexity rather than remove it.
“Businesses are being told to do more with less, and AI is increasingly presented as the answer to that challenge. But there is a difference between investing in AI and making it work in practice. Finance teams cannot simply introduce new technology and assume the productivity gains will follow.
“They need to understand how it is being used; trust the figures it produces and retain the ability to check and sign off decisions. Without that confidence, businesses risk adding another layer of complexity when they are already under pressure to control costs.”
Cran concluded, “Our research found 82% of finance leaders feel pushed to adopt AI faster than they’re comfortable with. The answer isn’t to slow down, it’s to adopt with the right controls. Every technology shift brings two benefits: what the tool does, and a business that gets better at change. Finance is well placed to lead both.”
