UK firms have been hit by energy and commodity shocks but confidence remains strong

More than three-quarters of UK businesses are already feeling the impact of the Middle East conflict, as rising energy costs and supply disruptions begin to feed into operations, yet confidence at the firm level remains remarkably strong.

A new study from Barclays, based on a survey of more than 500 business leaders, shows that 66 percent of companies are facing pressure from higher fuel and energy prices, while half report moderate to severe disruption to supply chains.

The findings highlight the speed at which political instability is affecting day-to-day business operations, with shipping and handling costs also rising for 43 per cent of firms, adding further pressure to margins.

Companies are already responding by streamlining operations and cutting costs. About 37 percent have taken steps to reduce energy use or improve efficiency across their supply chains, while nearly a third have raised prices to offset rising costs.

Other measures include reducing discretionary spending and strengthening overall cost control, many firms expect to strengthen these actions in the coming months. More than a third plan further price increases, indicating that cost pressures are likely to continue to reach consumers.

The data suggests that while businesses are adapting quickly, the cumulative impact 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 percent of businesses see support with cash flow management as important, while 39 percent highlight the importance of working capital and short-term debt.

Existing reserves also play an important role, with more than 80 percent of firms identifying them as important for navigating current conditions. Trade finance solutions and cross-border payments are equally viewed as important tools for managing disruptions in international markets.

Abdul Qureshi, head of corporate banking at Barclays, said the current environment presents a “confluence of pressures” on UK firms.

“For SMEs, reliable cash flow and access to working capital is critical, not just to keep operations running, but to secure future growth plans,” he said.

The impact of rising costs is already being felt in consumer spending patterns. Barclays data shows fuel consumption rose by around 11 per cent year-on-year at the start of the conflict, driven by higher prices and demand.

At the same time, discretionary spending is beginning to soften, with spending on vacations and travel falling by about 8 percent as households take a more cautious approach to their finances.

This shift in consumer behavior is likely to create more turbulence for businesses, especially those that rely on frivolous spending.

Despite these challenges, research reveals a significant difference between business-level confidence and broader economic sentiment.

While 78 percent of firms remain confident about their future and 74 percent are optimistic about their sector, confidence in the broader economy is declining significantly. Less than half of respondents expressed confidence in the UK economy, with even lower levels of confidence in 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 long-term implications.

Most business leaders expect the political uncertainty to weigh on investment plans and growth over the next year, although most expect only a moderate impact. A small proportion, about one in ten, foresees a significant obstacle to their performance.

Matt Hammerstein, chief executive of Barclays UK Corporate Bank, said firms are being forced to balance immediate challenges with long-term planning.

“Businesses will have to manage the disruption today while being ready to invest and grow when conditions improve,” he said.

The findings paint a picture of an economy under pressure but not in retreat. UK businesses are adapting to rising costs and uncertainty, using reserves and financial support to maintain stability.

However, persistent energy price volatility and country risks mean that the coming months will be critical.

While confidence at the corporate level remains strong, the widening gap with broader economic sentiment suggests that resilience may be further tested if external conditions deteriorate, particularly if cost pressures intensify or demand weakens.