More than three quarters of UK businesses are already feeling the impact of the Middle East conflict, as rising energy costs and supply chain disruption begin to feed through into operations, yet confidence at the firm level remains notably resilient.
New research from Barclays, based on a survey of more than 500 business leaders, shows that 66 per cent of companies are experiencing pressure from higher fuel and energy prices, while half report moderate to significant disruption to supply chains.
The findings highlight the speed at which geopolitical instability is affecting day-to-day business activity, with shipping and logistics costs also rising for 43 per cent of firms, adding further strain to margins.
Companies are already responding by adjusting operations and cutting costs. Around 37 per cent have taken steps to reduce energy usage or improve efficiency across their supply chains, while nearly a third have increased prices to offset rising expenses.
Other measures include reducing discretionary spending and tightening overall cost control, with many firms expecting to intensify these actions over the coming months. More than a third are planning further price increases, signalling that cost pressures are likely to continue feeding through to consumers.
The data suggests that while businesses are adapting quickly, the cumulative effect of higher costs and uncertainty is beginning to reshape decision-making across sectors.
Access to finance is emerging as a key factor in maintaining resilience. Barclays’ research shows that 41 per cent of businesses see support with cashflow management as essential, while 39 per cent highlight the importance of working capital and short-term credit.
Existing cash reserves are also playing a crucial role, with more than 80 per cent of firms identifying them as vital in navigating current conditions. Trade finance and cross-border payment solutions are similarly viewed as important tools for managing disruption in international markets.
Abdul Qureshi, head of business banking at Barclays, said the current environment presents a “convergence of pressures” for UK firms.
“For SMEs, dependable cash flow and access to working capital are increasingly important, not only to keep operations running, but to safeguard future growth plans,” he said.
The impact of rising costs is already being reflected in consumer spending patterns. Barclays data shows fuel spending rose by nearly 11 per cent year-on-year at the onset of the conflict, driven by higher prices and demand.
At the same time, discretionary spending is beginning to soften, with spending on holidays and travel falling by almost 8 per cent as households adopt a more cautious approach to their finances.
This shift in consumer behaviour is likely to create additional headwinds for businesses, particularly those reliant on non-essential spending.
Despite these challenges, the research reveals a striking divergence between business-level confidence and broader economic sentiment.
While 78 per cent of firms remain confident in their own prospects and 74 per cent are optimistic about their sector, confidence in the wider economy is significantly weaker. Fewer than half of respondents expressed confidence in the UK economy, with even lower levels for the global outlook.
This suggests that while businesses believe they can manage current pressures internally, there is growing concern about the external environment and its longer-term implications.
Most business leaders expect geopolitical uncertainty to weigh on investment and growth plans over the next year, although the majority anticipate only a moderate impact. A smaller proportion, around one in ten, foresee a significant constraint on their operations.
Matt Hammerstein, chief executive of Barclays UK Corporate Bank, said firms are being forced to balance immediate challenges with long-term planning.
“Businesses are having to manage disruption today while remaining ready to invest and grow when conditions improve,” he said.
The findings paint a picture of an economy under pressure but not yet in retreat. UK businesses are adapting to rising costs and uncertainty, drawing on cash reserves and financial support to maintain stability.
However, the persistence of energy price volatility and geopolitical risk means the coming months will be critical.
While confidence at the firm level remains strong, the widening gap with broader economic sentiment suggests that resilience may be tested further if external conditions deteriorate, particularly if cost pressures intensify or demand weakens.
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Middle East conflict hits UK firms but business confidence holds firm