Iran conflict drives UK business confidence to negative

Business sentiment in the United Kingdom has taken a sharp downturn as the conflict involving Iran intensifies. A recent survey of accountants highlights growing anxieties regarding operational costs, echoing sentiments shared by various industry groups following the commencement of military actions by the United States and Israel. The Institute of Chartered Accountants in England and Wales (ICAEW) reported that its quarterly Business Confidence Monitor was initially projected to enter positive territory for the first time since 2024. However, sentiment plunged from a reading of +2.8 just before the conflict began to -1.1 by the conclusion of the 10-week polling period on March 16.

"The first quarter was a tale of two halves for the UK economy as the early-year optimism was dramatically snuffed out as the Middle East conflict refuelled fears over skyrocketing cost pressures and wider economic conditions," Suren Thiru, chief economist at the ICAEW, said.

The survey, which included responses from 1,000 accountants, revealed several critical trends: Confidence has now declined for five consecutive quarters, marking the longest sustained downturn in over six years. Primary concerns among businesses include rising inflation, elevated energy expenses, and significant disruptions to global supply chains linked to the regional instability. Labor costs remain a major hurdle, with more than half of surveyed firms expressing worry as the national minimum wage increases. Approximately 35% of businesses cited volatility in energy prices as a critical risk factor.

Expectations for both domestic and export sales over the next year have softened slightly. Meanwhile, firms anticipate that the pace of selling price increases will remain at historically high levels. The ICAEW data suggests that the initial optimism seen at the start of 2026 has been largely erased by geopolitical tensions and their subsequent impact on the global economy.