The “New Normal” for Business in 2025

27 February 2025

As business leaders navigate the post-Covid “new normal,” they increasingly realize that long-term success depends not only on profitability but also on sustainability, responsibility, and technological foresight.

The last few years have seen profound changes in the way companies operate, driven by external shocks such as war and pandemics, coupled with a push for sustainability, digital transformation and governance reform. These changes have forced companies to rethink traditional models and implement new mechanisms to manage risk and foster innovation.

For mid-market companies, slow but steady economic growth in 2025 is a cautiously optimistic forecast. Often more agile than large corporations but with greater resources than small businesses, these companies are well placed to benefit from recovery trends.

For the past three years, the Centre for Economic and Business Research (Cebr) and Moore Global have been surveying mid-market companies in key global markets to understand their attitudes to these structural changes: it has been revealing.

Post-pandemic realities

The Covid-19 pandemic has fundamentally changed the way businesses operate, with hybrid working models becoming a fixture of the corporate world. In fact, 77% of businesses now support remote and hybrid working, marking a significant shift from pre-pandemic norms.

The impact of hybrid working has been largely positive, with many businesses reporting increased productivity. This is supported by other research, such as Cebr’s study for Virgin Media, which shows that Covid-induced digital changes can significantly boost employee productivity, meaning an extra two hours of work per day for remote workers.

However, the degree of success varies significantly across industries. In sectors such as IT and finance, where face-to-face interaction is less important, a study by Moore Global found that around 70% of companies reported that hybrid working had a very positive impact on productivity.

In contrast, industries such as travel, government services, and healthcare, which rely heavily on face-to-face interaction, reported lower rates of productivity gains.

Another significant change in the post-pandemic world has been the shift in consumer behavior. E-commerce is booming, with businesses across sectors recognizing the long-term potential of online sales. The pandemic has accelerated this shift, making online shopping a natural choice for many.

Sectors such as electronics, IT, and retail have particularly benefited from the surge in e-commerce, as both business-to-business (B2B) and direct-to-consumer markets adapt to the digital age. This transformation has not only pushed many organizations to embrace digital, but has also proven to be beneficial for those who embrace it.

Companies that have already invested in digitalization are doubling down on their efforts, while those who are slow to adapt to this changing landscape risk incurring significant losses, ultimately jeopardizing their competitiveness and market relevance.

The Outlook for Mid-Sized Companies in 2025

As business leaders continue to adapt to this new reality, the economic environment they face remains a critical determinant of long-term success. Midsize businesses will need to navigate a challenging macroeconomic environment defined by inflationary pressures, interest rate dynamics, global supply chain recovery, and the aftermath of conflicts.

While inflation has spiked in recent years due to supply and demand imbalances following the pandemic and geopolitical tensions, inflationary pressures are expected to moderate in 2025. For example, Cebr predicts that interest rates will be significantly lower than in recent years, which should provide some relief to businesses and allow for increased investment in capital projects, expansion, and digital transformation initiatives.

However, with interest rates raised to near-term highs, borrowing costs remain higher than they have been for most of the past 15 years. Consequently, companies that rely on debt to expand must carefully manage cash flows to avoid over-leveraging, particularly in lower-margin sectors.

Another major concern is the potential for a global recession caused by a perceived slowdown in the US economy. Initially linked to a worsening labour market, fears of a sustained economic slowdown have now subsided. US performance will continue to play a key role in shaping business conditions around the world, particularly in countries at risk of increased trade turmoil under the new Trump presidency.
International supply chains, still recovering from the disruptions caused by the pandemic, remain under pressure. Uncertainty in the Middle East has reignited concerns about supply chain vulnerability. Disruptions in key markets could lead to production delays or increased costs, particularly in industries such as manufacturing, retail and technology.

Despite these challenges, growth prospects in key regions have improved in 2024 compared to 2023, and this upward trajectory is expected to continue in 2025 and beyond.

Addressing economic pressures, supply chains, and cybersecurity

The rise in concerns about supply chain vulnerabilities is clear, with nearly half (45%) of companies reporting that supply chain disruptions are a greater threat now than they were five years ago. The financial impact of these disruptions is significant.

A survey of 400 senior supply chain executives in eight countries by The Economist found that two-thirds of respondents reported a 6-20% drop in revenue due to supply chain issues in 2021.

However, companies are being proactive when it comes to mitigating these risks. On average, companies conduct supply chain audits three times a year, with 19% of organizations conducting more than four audits per year. Companies with more diversified supply chains tend to be particularly diligent, with 98% conducting audits at least once a year.

Beyond supply chain vulnerabilities, businesses are increasingly concerned about the financial and operational impact of cyber-attacks. More than half (54%) of businesses surveyed said cyber threats have become more severe over the past five years.

The reality of these risks is underscored by research from Cebr, which found that more than a third of UK businesses were victims of fraud, cyber-attacks or data breaches last year, resulting in losses of £11.3bn for the retail sector alone.

There are some supply chain risks that are more difficult for businesses to protect against, with a particularly telling example in the post-pandemic period being around the labour market and the struggle to retain talent. These concerns are particularly prevalent in the UK and Germany, where 31% and 27% of businesses respectively report that their ability to retain talent has worsened since 2019. As businesses continue to adapt their operations and invest in technology, addressing talent issues is likely to remain a priority.

Artificial Intelligence as a Driver of Innovation and Efficiency

Amid the challenges of recent years, significant opportunities have also emerged for businesses. Perhaps the most notable of these is artificial intelligence.

While some organizations are hesitant to fully embrace artificial intelligence, those that don’t risk missing out on one of the most transformative tools available today. Awareness of this is growing, with 77% of companies reporting increased investment in or use of AI over the past four years.

For large companies, average annual investment in AI has reached $1.5 million, indicating a high valuation of the technology’s potential. Despite this significant investment, many of the anticipated benefits of AI have yet to be fully realized.

The impact of AI will vary by industry. Industries such as information technology and finance will be among the fastest growing and can expect significant productivity gains. In contrast, industries focused on solving human-centric problems, such as healthcare or hospitality, may struggle to fully integrate AI into their operations.

This difference highlights the complexity of AI implementation and the uncertainty of its long-term impact.

However, the majority (56%) of companies view AI as a positive force for their organization, more than twice the number who view it as a potential threat. This clear majority highlights the growing recognition of AI’s ability to drive innovation, improve efficiency, and ultimately transform industries.

As companies navigate the uncertainties associated with AI, those who invest strategically and leverage the technology will be better positioned to harness its full potential. Arguably, AI is not just a tool for the future, but a driver of success in the present.

The Future of Business: Resilience, Sustainability, and Tech Foresight

As businesses navigate a changing environment, success will be on the side of those who are adaptable, forward-thinking, and committed to sustainability. Hybrid working, e-commerce and artificial intelligence are not just trends, they are opportunities for efficiency and innovation.

However, challenges remain. Supply chain disruptions, cybersecurity threats and economic uncertainty continue to weigh. Companies that proactively manage these risks, ahead of regulatory changes, will be best positioned to thrive.

By combining risk management, ESG principles and technology adoption, businesses can build resilience and unlock new opportunities. Ultimately, those who combine innovation with responsibility will shape the future.

Author:
Samuel Miley is Managing Economist at the Centre for Economic and Business Research.

Read the original article on the Moore Global website: https://www.moore-global.com/intelligence/articles/november-2024/the-new-normal%E2%80%9D-for-business-in-2025

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