Three quarters of UK firms impacted by Middle East conflict but confidence in own prospects remains resilient
Barclays Business Prosperity research among over 500 UK business leaders assessing the impact of the Middle East conflict shows:
66 % of businesses say they are already experiencing pressures from fuel and energy prices, while 50 % report moderate or significant supply chain disruptions
37 % have taken steps to reduce energy usage or improve efficiency in response, and 32 % have adjusted pricing
Despite the challenges, confidence in firms’ own business (78 %) and the outlook for their sector (74 %) remains relatively resilient
Rising energy costs, supply chain disruption and ongoing geopolitical uncertainty linked to the Middle East conflict are already impacting the majority of UK businesses. Two thirds (66 %) report experiencing energy and fuel cost pressures, while shipping and logistics costs (43 %) are also weighing on margins.
According to the latest Barclays Business Prosperity research, in response, UK firms are already taking action to mitigate the operational impact of geopolitical instability. Almost four in 10 (37 %) are cutting energy use or improving supply‑chain efficiency, while 32 % have adjusted pricing to offset rising costs.
Others are cutting discretionary spending or wider operational costs (29 %), with more firms expecting to take similar action over the next six months (38 %), and a third (34 %) are planning to pass rising costs on to customers.
Cash buffers and financial support become increasingly important for firms
As firms adapt to geopolitical shocks, access to finance is playing a central role in supporting business resilience. Support with managing cashflow (41 %) and access to working capital or short-term credit (39 %) are becoming increasingly important.
The majority (83 %) see existing cash savings as important to navigate the geopolitical disruption, with working capital support (78 %), international trade finance (68 %) and cross border payments solutions (67 %) all seen as key sources of support.
Cost pressures have already started to feed through to consumer behaviour. Barclays Consumer Spend data shows fuel spending rose by 10.9% year-on-year at the start of the conflict, reflecting rising prices and increased demand, while spending on holidays and travel fell by 7.9% in in mid-March as households take a more cautious approach to their outgoings.
Abdul Qureshi, head of Business Banking at Barclays, said: “UK businesses are facing a convergence of pressures, with multiple challenges hitting at once. The impact is being felt most acutely by firms exposed to high energy costs, disrupted supply chains and international trade, and is compounded by a prolonged period of uncertainty ahead.
“For SMEs, this means dependable cashflow and access to working capital are increasingly important – not only to keep operations running, but to help safeguard future growth plans.
“Through our £22bn Barclays Business Prosperity Fund and sector specialists across the country, we’re here to provide businesses with support to navigate this uncertainty.”
Confidence stronger at firm level than macro expectations
Despite these challenges, confidence in firms’ own prospects (78 %) and the outlook for their sector (74 %) remains relatively resilient.
Confidence in the UK (49 %), global (45 %), and European (54 %) economies is markedly weaker however, pointing to a clear divergence between business level confidence and the macroeconomic environment.
While business leaders expect geopolitical uncertainty linked to the conflict to restrict investment and growth plans over the next 12 months (80 %), they anticipate only a slight or moderate impact (69 %), with just 11 % reporting a significant constraint on plans.
Matt Hammerstein, CEO of Barclays UK Corporate Bank: “Our data shows most business leaders expect the impact of the Middle East conflict to continue into the year ahead, meaning firms are having to manage immediate pressures while still planning for future growth.
“In an environment of ongoing uncertainty, resilience and flexibility matter more than ever. Access to working capital, trade finance and cross border payment solutions can make a real difference – helping firms manage disruption today while remaining ready to invest and grow when conditions improve.”