Eight in 10 UK firms suffering hit from Iran war: ‘Uncertainty has become the norm’

Eight out of ten UK businesses are experiencing negative effects from the ongoing Middle East conflict, with 20 percent freezing investment plans amid heightened geopolitical uncertainty, according to the latest Barclays Business Prosperity index. The report highlights that 64 percent of firms are struggling with rising energy and fuel costs, 34 percent face increased shipping and logistics expenses, and one-third are dealing with supply chain disruptions. These challenges are expected to impact consumers, as 37 percent of surveyed senior decision-makers anticipate passing on cost increases to households. The Barclays data, which covers around 900,000 businesses, reveals differing responses based on company size. Small businesses are increasing their savings and building financial buffers, with a 13.1 percent rise in savings and a 1.5 percent increase in cash reserves in early 2026. In contrast, larger firms are focusing on long-term investment, marked by a 6.9 percent increase in borrowing and a 5.2 percent decrease in savings. Barclays UK Corporate Bank CEO Matt Hammerstein noted that the combination of geopolitical instability and sustained high costs is directly affecting cash flows, borrowing decisions, and investment strategies across the UK business landscape. Despite the challenges, many larger companies are intensifying their investment in technology, particularly artificial intelligence (AI) and cybersecurity. Nearly 70 percent of firms plan to boost cybersecurity spending in the coming year, while over half report active use of agentic AI in their operations. More than half of respondents believe AI and automation have enhanced productivity, with 38 percent noting a reduction in time spent on administrative tasks. Hammerstein advocated for the creation of a dedicated AI ministerial role at the Cabinet level to coordinate strategy, industry engagement, and crisis response, emphasizing the importance of AI as a driver of productivity and global competitiveness. The findings underscore the complex environment UK businesses face amid global geopolitical tensions and economic pressures. While uncertainty has become the norm, the shift toward digital innovation and AI investment signals a strategic adaptation aimed at sustaining growth and maintaining competitiveness in a volatile global market.