UK businesses are not so certain about their future, at least according to the Business Confidence Index which dropped to -14.6, the lowest since Q4 2022. This aligns with multiple other reports that echo the concern.
According to the report, exports have slowed while domestic sales have been more resilient. At the same time, input prices have risen pushing overall prices higher.
The thesis is the conflict with Iran has spiked the decline in business confidence with companies revising expectations lower.
After geopolitical concerns at 65%, the cost of labor is in second place at 58% driving concerns.
Input price inflation in the second quarter of 2026 rose from 3.6% to 4.1% as oil and gas prices increased and supply chain bottlenecks emerged. Rising energy prices are expected to impact other costs, and inflation expectations for the coming year anticipates input price inflation from 3.0% in the previous quarter to 3.8% in Q2 2026.
Sebastien Marchon, CEO at Rydoo, says finance teams are battling rising costs, weaker sales and squeezed margins. He says they are seeing more CFOs seeking technology to improve operational efficiency.
Late payments is another concern causing short term cash flow challenges.
“… paying on time helps companies to keep budgets and forecasts up to date, which is crucial in these uncertain times.”
Policy can help improve the situation but the current turmoil in the Labor government is not helping. At the same time, the government is promoting growth measures as smaller firms vocalize their challenges.