A survey by accountancy firm BDO reveals that more than half of medium-sized UK businesses cite higher energy and fuel costs, along with supply chain pressures, as their biggest challenges due to the ongoing US-Israeli war on Iran. The conflict, now in its third month, is forcing companies to halt investment and hiring plans as they prioritise cost management over growth.
Richard Austin, a partner at BDO, stated that UK businesses are “struggling to absorb the latest economic shock in an uncertain global and political backdrop.” The survey coincides with Chancellor Rachel Reeves travelling to Paris for G7 finance minister meetings to coordinate efforts to limit the war's economic impact. Reeves is expected to announce further support for households and businesses.
A separate report from the Chartered Institute of Personnel and Development found that almost 60% of employers now prioritise cost management, driven by rising energy and supplier bills compounded by higher labour costs from last year's employer national insurance increases and minimum wage rises. Meanwhile, data from the Recruitment and Employment Confederation shows April vacancies fell 7.7% month-on-month to 711,733, down 5.6% year-on-year.
Neil Carberry, chief executive of the REC, warned that the labour market is entering a more unpredictable phase, with hiring likely to take a further hit due to “growing sensitivity to the conflict in the Gulf” and “sudden domestic political uncertainty.” However, BDO noted potential bright spots, with nearly a third of business leaders considering prioritising UK-based suppliers and 28% contemplating moving production closer to home, which could boost British manufacturers.
