More than half (57%) of businesses say a combination of supply chain pressures and higher energy and fuel costs are among their biggest challenges as they seek to manage the impact of conflict in the Middle East, according to new research from accountancy firm BDO.

The bi-monthly survey, covering 500 businesses with revenues between £10m and £500m, found that supply chain pressures – including material delays and costs, stock shortages, and suppliers folding – were a top concern for two in five business leaders (39%) as they navigate this latest economic shock.

As a result of ongoing uncertainty, three in five mid-sized companies (60%) intend to halt or reduce investment as they wait for the situation to stabilise, rising to over two-thirds in the retail (69%), tech (69%) and financial services (67%) sectors.

Worries over supply chain reliability in an increasingly volatile geopolitical environment have prompted one in three business leaders to prioritise UK-based suppliers (31%), with a further 28% considering onshoring or nearshoring, in a move that could provide a boost to UK manufacturing.

Richard Austin, partner at BDO, said: “The mid-market is vital to wider UK growth. These companies are an overlooked engine of our economy, but instead of focusing their sights on expansion, they are struggling to absorb the latest economic shock in an uncertain global and political backdrop.

“There are bright spots in this research for UK manufacturing. However, mounting pressures around energy, fuel costs and supply chains, which were issues affecting businesses even before the conflict in Iran, are only adding to the sustained feeling of uncertainty amongst business leaders.”

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