Optimism among medium-sized companies globally fell by six percent, to just 64%, according to Grant Thornton's latest international business report. Although optimism remains high relative to historical levels, mid-sized businesses are certainly aware of the challenges they face, with 63% citing economic uncertainty as the main constraint they currently face. This is followed by energy costs (62%) and labor costs (57%).

Despite these very real constraints and what the International Monetary Fund recently described as a "gloomy and uncertain" economic outlook, the desire for international expansion seems unstoppable. Export expectations remain close to record highs, with 44% of respondents predicting an increase over the next 12 months. Likewise, 42% of them expect to increase their international income, and 58% of respondents expect to increase their total income in the next 12 months.

As some governments announce support programs to tackle rising energy costs and, by default, economic uncertainty, it's easy to see why labor costs are seen as a constraint for businesses, with 83% of respondents expecting pay rises in the next 12 months. There is, however, a limit to what businesses can afford, with only 22% of businesses indicating that they intend to offer wage increases during inflation.

Despite these restrictions, mid-sized companies are still investing in technology and once again topped the list with 60% of them expecting to increase investment in this area in the next 12 months – equaling the record set last year. This is followed by investment in research and development (55%) and staff skills (55%).

While investment in new office space remains at the bottom of the list with 40% of them expecting to increase investment in the next 12 months, this is still a record since we first started collecting data on mid-market companies in 2011. This is well above the long-term average of 26%, which is probably explained by the fact that companies need to invest in new hybrid work models.

In the direction of the desire for international expansion, Grant Thornton has identified four key trends:

• Appetite for international expansion remains strong
• Global trade routes and supply chains are being reshaped along geographic and political lines
• International agendas and pressures vary considerably between regions
• Inflation continues to rise, and mitigating its impact is critical to international success.

When expanding to the international market, you need the help of local experts. Contact Grant Thornton experts for help or any additional information!

Data source: Grant Thornton International Ltd.