Mid-market business confidence spikes with AI adoption

Research from Pitcher Partners’ latest Business Radar survey of middle market business founders and decision makers has revealed a more resilient and confident picture as AI transforms the way they assess the labour market.

The firm noted the survey demonstrates that business strategies are reducing vulnerability to any single headwind, including talent scarcity, and that supply chains are now more resilient against weaknesses exposed during the pandemic.

The top three factors that have influenced business confidence include increased demand for products or services, customer preferences, and technology advancements.

The top three main concerns cited include inflation, increased operating costs, and government regulations.

Chris Hanna, Pitcher Partners Adelaide partner, said the drop in respondents having reported labour costs as a negative factor is a sign of both a resettled labour market and the change that technology is delivering.

“There’s been a shift in the conversations we’re having around AI. Business leaders have now had time to better understand and appreciate the suite of AI-powered business tools available, and they are starting to see them as viable alternatives to adding more FTEs to the payroll,” he said.

“What we’re seeing isn’t simply businesses replacing people with AI, more that leaders are assessing where people are critically important to the success of the businesses, and in the same vein where AI adds more value.”

AI is noted to allow leaders to make strategically more important decisions about reskilling and other factors that ultimately add to the resilience of their business, and is adapted to the “shifting oriental landscape”.

In terms of government regulation being noted as a top concern for mid-market business leaders, the federal government has given few signs that they would take further action to reduce or streamline red tape.

Gavin Debono, Pitcher Partners Melbourne partner, said based on his own observation, middle market business leaders are feeling that the government has ignored the concerns and wishes of the business community, continuously missing opportunities to offer worthwhile support.

“The federal budget offered no vision for addressing the critical economic challenges, no support for businesses navigating a turbulent and complex marketplace, and no actions to stimulate investment,” he said.

“However, the Treasurer is now starting to talk about genuine tax reform and taking productivity seriously, and this sentiment may turn if he delivers the changes that the business community has been seeking.”

The survey also found that only 17 per cent of middle market businesses are facing high or extreme change, even as they are impacted by tariffs, global uncertainty, and disruptive technology.

Seventy-eight per cent of respondents said they have an appetite for high or moderate risk, and 87 per cent said they are “staying the course” and will continue to proactively invest in growth.

Forward-thinking businesses are creating multiple safety nets to make their business more resilient, according to Pitcher Partners Brisbane partner, Kylie Lamprecht.

Lamprecht said the data reveals a new playbook is emerging among middle market leaders.

“Rather than choosing between caution and ambition, they’re executing both, optimising operations and cost structures to preserve margins, and investing to create long-term value,” she said.

“Protecting against threats is certainly important but good business leaders are also being proactive, growing their customer base and revenue streams, creating new possibilities for growth. This balanced approach builds businesses that can not only weather economic storms but accelerate through them while competitors retreat.”