OCTOBER 2025

Business Radar 2025 Understanding the businesses that drive Australia's economy

The Business Radar report canvasses the trends, challenges and opportunities experienced by Australia’s middle market businesses.

Independently commissioned, our most recent survey captured the sentiment of nearly 150 owners and leaders across a range of growth stages, states and industries.

Here, you’ll read how business leaders feel about the current and future success of their businesses and what that could indicate for Australia’s economy.

Key findings

AI adoption is widespread but strategic implementation lags: While 93% of leaders are familiar with AI and 72% actively use AI tools, only 13% have made it a true strategic priority with dedicated budgets and scaling plans
Workforce transformation is underway with mixed impacts: Half of businesses report moderate role changes, with employees spending more time on creative work (42%) and less on administrative tasks (36%), though concerns about job losses have increased from 29% to 37% since 2023
It’s only just the beginning for AI adoption: Growth-stage businesses (63%) and those with 100-250 employees (61%) show highest readiness for AI-driven industry shifts, and middle market businesses in the growth phase are incorporating operational advantages through bold AI implementation
Middle market confidence remains stable despite AI disruption concerns: Though mature businesses show declining confidence as they view their size and legacy as potential disadvantages in AI transformation

Read on to learn how middle market leaders are successfully navigating the AI transformation and the strategic actions you can take to position your business for the next generation of growth or download your copy of the latest Business Radar.

October 2025

AI Integration: From novelty to normality

How middle market leaders are strategically navigating widespread AI adoption while balancing efficiency gains with workforce transformation

Universal awareness, strategic implementation lags

Just two and a half years after OpenAI’s game-changing ChatGPT release, awareness of AI is almost universal among middle market leaders, with 93% now familiar with the technology. Nearly half (46%) say they “know a lot” about it compared to just 21% two years ago.

While 72% of businesses are actively engaging with some form of AI, most commonly through text-based assistants (60%), Microsoft Copilot (48%) and customer support chatbots (38%), only 13% have made it a true strategic priority with dedicated budgets and scaling plans.

Familiarity with AI among middle market businesses

Businesses current engagement with AI

The productivity promise materialising

While businesses are cautious, they’re positive about the potential of AI. Teams are spending more time on creative, strategic work (42%) and less time on low-value admin (36%). Leaders report faster turnaround on deliverables (40%), with work becoming more self-directed (33%) and cross-functional collaboration increasing (33%).

These efficiency gains are translating into business advantages: 42% of businesses expect to expand faster due to AI-enabled efficiencies, while 38% plan to introduce new AI-powered service offerings. However, 38% also expect to increase investment in proprietary data, technology or IP to support these initiatives.

How ready are businesses for AI adoption?

The readiness gap

More than half of businesses say they’re ready to adopt AI, but the foundations may not yet be in place. Only 12% feel fully prepared to scale adoption, while 39% are only fairly ready. Almost 35% report being neutral or partially ready, and 15% are somewhat unprepared or not ready at all.

The barriers are clear: technical and compliance issues (65%), capability gaps (64%), lack of trust in AI outputs (52%), financial constraints (46%) and cultural challenges (45%).

Business leaders should never assume AI outputs are completely accurate or trustworthy without verification. A healthy level of scepticism is valuable: question what AI produces, ask for evidence, and examine the assumptions behind its answers.

Main challenges to AI adoption

People hold the key to success

The focus on the human element is critical. A recent study from MIT interviewed 150 executives, surveyed 350 employees, and reviewed 300 AI projects. It found that 95% of pilot projects failed to deliver measurable financial gains. The key issue in the MIT report was that most organisations seeking to implement and integrate AI into their business are currently unable to get a return on their investment.

The AI technology is not yet developed to be capable of learning from feedback and mistakes, cannot retain content across sessions, which limits the ability to roll out solutions in an effective and efficient way.

The trade-off

There is, however, a potential trade-off to be considered. Some 23% of respondents have seen some roles being reduced altogether, which may reduce costs in the short term but risks eroding staff morale. Data from our previous Business Radar survey on AI in 2023 showed that concerns over job losses was at 29%; that has now markedly increased to 37% in 2025.

They’re right to be concerned. A report from the Productivity Commission warns that the value of AI to the Australian economy will come with a painful transition period for workers whose roles will be made redundant.

AI impact on the nature of roles across businesses

As AI becomes embedded in daily operations, businesses, along with their competitors and clients or customers, will all have access to the same tools. That levelled playing field means organisations will need to better understand the value they offer beyond outputs or time spent.

Yet successful AI implementation requires as much focus on people as technology. Organisations must invest in retraining, communicate openly about changes, and help employees see their future in an AI-enabled workplace.

Key actions to take:

Build the base before adding AI

Build strong data systems, governance and business intelligence capability before layering AI on top. Check your infrastructure is ready for the increased loading.

Bring your people with you

Address employee concerns openly and invest in upskilling so they can thrive alongside AI..

Start with the outcomes in mind

Decide what you want AI to achieve so it drives strategy, not side projects.

Consider safeguards and reduce exposure

Put policies, safeguards and education in place to prevent careless or unsafe use of the AI tools.

Define the human value only you provide

Distinguish your business and protect your revenue through the human skills and insights AI can’t replicate.

Educate, educate, educate

Looks for ways to provide training in multiple formats and forums, continue to share knowledge on types of tasks where AI adds value.

Research and trial

Get access to the latest AI developments, whether that is in-house expertise or outside advisors. Then try them out.

OCTOBER 2025

Business confidence

Middle market’s resilience underpinning steady confidence

Australia’s middle market leaders have unshakable confidence in the face of increasingly challenging conditions – geopolitical tensions, increasing costs, and the unpredictability of technological disruption. Middle market leaders aren’t wearing rose-tinted glasses. This battle-hardened cohort sees challenges as manageable factors rather than insurmountable obstacles.

However, we’re seeing a notable shift among mature businesses, whose confidence has dropped from 8.10 earlier this year to 7.67 – slightly lower than the 8.00 average. This suggests that established businesses may view their size and legacy systems as potential disadvantages in the face of incoming technology challenges.

Middle market business confidence over time

Technology advancement drives confidence surge

Technology advancement has emerged as a major driver of confidence, cited by 43% of leaders as a positive factor – a dramatic increase from just 12% since our last survey.

This represents one of the most significant shifts we’ve observed, positioning technology as one of the top five positive factors since early 2024.

Labour market challenges in the rear view

Meanwhile, labour market challenges have moved to the rear-view mirror. Go back 18 months, and a squeezed labour market loomed large for our middle market leaders.

That pressure has eased significantly since mid-2024 (dropping from 42% to 16%), with labour shortages no longer appearing in the top five factors most impacting business confidence.

A deep dive into AI suggests that the technology may have contributed to this shift.

July 2025

Leadership during uncertain times

While tariffs are driving the media headlines, they aren’t impacting the middle market so much

How are leaders navigating extra turbulence?

While the media reports would have us believe that business leaders are (very) afraid of an incoming catastrophe, our middle market business leaders aren’t panicking.

The vast majority – 83% – are seeing no or only moderate changes in uncertainty levels, with just 17% saying they’re facing high or extreme change, even in the face of tariffs, increasing global uncertainty, legislative change and disruptive technology.

These stats are reflected in on-the-ground observations
from Pitcher Partners’ experts.

“In the media, these are ‘uncertain times’, but clients are
more ‘steady as she goes’. Exporters have some concerns,
but they haven’t completely put the brakes on. We hear a lot
about catastrophe – but it hasn’t played out yet for many,”
said Chris Hanna, Principal, Pitcher Partners Adelaide.

Business’s change in uncertainty levels in light of recent events

While tariffs are driving the media headlines, they might not be relevant to most middle market businesses. Only 29% of respondents export to the US, with the majority of goods sourced from Australia and inbound from China.

Our survey respondents were fairly aligned on what is causing uncertainty, even if they were not too concerned about it. Tariffs and trade policies (24%) and inflation or interest rates (21%) were well ahead of other events, with the third highest, the labour market, only chosen by 12% of respondents.

Map of North and South America with the United States highlighted in gray and an arrow pointing to it from a yellow box stating: 'While tariffs are driving the media headlines, they might not be relevant to most middle market businesses, with only 29% of respondents export to the US

Text discussing strategic responses to tariffs, including exploring alternative markets, assessing consumer cost absorption, evaluating profit margins, and monitoring political negotiations.

A new playbook emerging

When asked to describe general business posture, 87% said they were staying the course or proactively investing in growth. This generally reflects an appetite for risk, with 78% reporting an appetite for high or moderate risk.

“We’re seeing some clients move more quickly towards succession transition, while others are winding back plans”, said Kylie Lamprecht, Partner, Pitcher Partners Brisbane.

Current business posture

Current risk appetite

When asked what businesses should be doing to navigate times of uncertainty, 31% said organisations should be maintaining strong financial discipline, 38% adapting to changing customer needs and 36% retaining talent.

These were strongly aligned with responses about factors influencing business resilience. Strong cash flows and robust balance sheets could be seen as the result of financial discipline, retaining excellent talent helps protect the business’ ‘special sauce’ and key relationships, and accessing reliable information improves overall decision-making.

Cutting costs, not quality

But what are leaders actually doing in response to the market uncertainty? When we dig deeper into business posture, an interesting tension emerges.

On one hand, 69% of respondents say they are actively looking to cut costs.

On the other, almost as many are pursuing growth initiatives – 67% are expanding into new markets and 65% are introducing new products and services.

This isn’t contradiction – it’s strategy.

Rather than choosing between caution and ambition, many middle market leaders are doing both. They’re taking a sophisticated and measured approach: optimising operations and cost structures to preserve margins, while simultaneously investing in areas that create long-term value. Two in five are focusing on supply chain and operational efficiency, and 40% have accelerated business model transformation – like investing in tech, digitising operations, etc.

It’s a sign that businesses are thinking broadly and taking actions on many important areas of their business: containing risk while preparing for opportunity.

In light of recent economic and market conditions, businesses have taken action on the following:

Confidence built on careful planning

To support this planning, businesses say they’re primarily seeking support from advisors or consultants (42%) or collaborating with industry groups and peers (44%).

Solid advice is always critical, but equally important are the strategic connections you forge. Great advisors will maintain and help you access their networks. Similarly, they should go beyond generalisations and instead listen, understand your unique context, and offer genuinely tailored solutions.

Text-based graphic featuring quotes from Business Radar survey respondents highlighting contingency planning strategies such as diversifying supply chains, focusing on existing customers, and increasing cash reserves to manage uncertainty.

Key actions to take:

Balance cost cutting against growth

Refine operations and supply chains to build efficiency while continuing to invest in innovation, expansion and customer value

Strengthen your network

Find mentors, organisations and advisors who connect you to wider networks and opportunities.

Prioritise people

Focus on strong, steady leadership that supports your team’s capability, motivation and stability.

Make decisions based on strategy, not fear

Get clear on your goals, and then hold your nerve.

Build your buffers

Whether that’s building a financial cushion or diversifying supply chains, customer base or revenue streams.

Automation gives the edge

Ensure your tech and AI are being used to re-skill your people and lift productivity

April 2025

Mandatory climate reporting and ESG

Ready or not, middle market businesses are navigating a complex landscape

Who is impacted?

The mandatory climate reporting legislation requires that all companies subject to mandatory climate-related financial disclosures are phased in three groups, over a four-year period, based on size or level of emissions, as outlined in the table below.

The reporting regime makes climate reporting mandatory for all entities currently required to issue financial reports under Part 2M of the Corporations Act 2001 (Act) – including listed and unlisted companies, financial institutions, registerable superannuation entities and registered investment schemes.

Companies that are exempt from lodging financial reports under Chapter 2M of the the Act don’t have to make the disclosures but may choose to do so.

Awareness? Yes. Clarity? No.

Our respondents showed strong awareness of the incoming requirements, but many remain unclear on what it will actually mean for their businesses. Six in 10 say they have some level of familiarity with the new requirements, and more than half feel confident that they know what needs to happen to reach compliance. However, 75% say they’re not at all prepared or only somewhat prepared for mandatory climate reporting, despite the fast-approaching deadlines.

While some requirements are familiar, greenhouse gas emissions accounting may be the most challenging and novel requirement, particularly for indirect Scope 3 emissions outside of an organisation’s direct control.

Extra work or business benefit?

The middle market’s slower progress towards compliance could be linked to the perceived lack of value that the requirements add to their businesses. It’s clear that for many businesses, the reporting requirements are seen as an administrative burden.

Many middle market businesses are not likely to be caught in the reporting regime, unless required as part of the supply chain emissions reporting.

What is ESG?

ESG refers to Environmental, Social and Governance and is a framework that considers a company’s sustainability impact, and how it manages risks and opportunities in a changing world.

Turn the negative into a positive

Effective governance and strategic planning are crucial in meeting the new ESG and mandatory climate reporting requirements. By integrating these reporting requirements into the company’s governance framework, businesses can make sure that they are not only compliant but also strategically positioned to benefit from these regulations. This involves setting clear objectives, allocating resources efficiently, and continuously monitoring progress to meet the reporting standards.

Meet our middle market businesses

This report defines middle market businesses as typically employing 20–200 people with annual revenue of $2–$500 million. While their operating models, sizes and industries vary widely, these businesses can be categorised into four lifecycle stages.

A range of business structures: Private, Public and Not-for-profit