More than three-quarters of UK businesses are already feeling the impact of the Middle East conflict, as rising energy costs and supply chain disruptions begin to impact operations, but confidence at business level remains remarkably resilient.
New research from Barclays, based on a survey of more than 500 business leaders, shows that 66 percent of businesses are being pressured by higher fuel and energy prices, while half report moderate to significant disruption to supply chains.
The results highlight how quickly geopolitical instability is impacting daily business operations, with 43 percent of companies also seeing shipping and logistics costs rise, putting additional pressure on margins.
Companies are already responding with operational adjustments and cost reductions. Around 37 percent have taken measures to reduce energy consumption or improve efficiency in their supply chains, while almost a third have increased prices to offset rising costs.
Other measures include reducing discretionary spending and tightening overall cost controls. Many companies expect to intensify these measures in the coming months. More than a third are planning further price increases, suggesting that cost pressures are likely to continue to impact consumers.
The data suggests that while companies are adapting quickly, the cumulative effect of higher costs and uncertainty is beginning to change decision-making across industries.
Access to finance is proving to be a key factor in maintaining resilience. Research from Barclays shows that 41 percent of businesses see cash flow management support as essential, while 39 percent highlight the importance of working capital and short-term loans.
Existing cash reserves also play a crucial role, as more than 80 percent of companies see them as crucial to dealing with the current situation. Trade finance and cross-border payment solutions are equally seen as important tools to address disruptions in international markets.
Abdul Qureshi, head of business banking at Barclays, said the current environment represents a “convergence of pressures” for UK businesses.
“Reliable cash flow and access to working capital are becoming increasingly important for SMEs, not only to maintain operations but also to secure future growth plans,” he said.
The effects of rising costs are already reflected in consumer behavior. Data from Barclays shows that fuel spending rose almost 11 percent at the start of the conflict compared to the previous year, reflecting higher prices and demand.
At the same time, discretionary spending is beginning to decline: spending on vacations and travel is down nearly 8 percent as households become more cautious with their finances.
This shift in consumer behavior is likely to create additional headwinds for businesses, particularly those that rely on non-essential spending.
Despite these challenges, the research shows a notable divergence between corporate-level confidence and overall economic sentiment.
While 78 percent of companies remain confident in their own prospects and 74 percent are optimistic about their industry, confidence in the overall economy is significantly weaker. Less than half of respondents expressed confidence in the UK economy, with scores on the global outlook even lower.
This suggests that while companies believe they can manage current pressures internally, there is growing concern about the external environment and its longer-term impact.
Most business leaders expect geopolitical uncertainty to weigh on investment and growth plans next year, although the majority expect only a moderate impact. A smaller proportion, around one in ten, expects significant restrictions on their business activities.
Matt Hammerstein, chief executive of Barclays UK Corporate Bank, said companies were being forced to balance immediate challenges with long-term planning.
“Businesses today must navigate disruption while remaining ready to invest and grow when conditions improve,” he said.
The results paint a picture of an economy that is under pressure but not yet in retreat. British businesses are adapting to rising costs and uncertainty, drawing on cash reserves and financial support to maintain stability.
However, the coming months will be crucial due to ongoing energy price volatility and geopolitical risk.
While confidence at the corporate level remains strong, the widening gap with broader economic sentiment suggests that resilience could be further tested if external conditions worsen, particularly if cost pressures increase or demand weakens.
