More than half of UK mid-market businesses say supply chain disruption and rising energy and fuel costs are among the biggest challenges facing them as conflict in the Middle East intensifies economic uncertainty, according to new research from BDO.
The survey of 500 companies with revenues between £10mn and £500mn found that 57 per cent of business leaders are grappling with the combined impact of higher operating costs and disruption to supply chains. Two in five identified supply chain pressures — including material shortages, delays and supplier failures — as a major concern.
The findings underline the vulnerability of Britain’s mid-market companies, a segment that generates more than £1.8tn in annual revenues and accounts for roughly one-third of private sector employment.
Growing uncertainty is already affecting investment decisions. Six in ten firms said they planned to halt or reduce investment until conditions stabilise, with the figure rising further in sectors including retail, technology and financial services.
The pressure is also beginning to shape operational decisions. More than a third of businesses are considering passing higher costs on to customers, while 30 per cent are weighing hiring delays or workforce reductions as they seek to protect margins.
The renewed strain comes as businesses face the knock-on effects of instability around the Strait of Hormuz, a critical global energy and shipping route. Higher fuel and transport costs are compounding challenges that many firms were already managing before tensions escalated.
At the same time, the disruption is prompting some companies to reassess supply chain strategies. Around one-third of respondents said they intended to prioritise UK-based suppliers, while others are considering nearshoring or onshoring operations — a shift that could provide support for domestic manufacturing.
Recent data from BDO’s Business Trends report suggested some companies may already be accelerating activity ahead of anticipated volatility later in the year, with output levels showing a modest rise in April.
Business leaders are now calling for greater government support should conditions deteriorate further. Proposals include targeted grants for firms affected by supply chain disruption and measures to offset rising transport and fuel costs.
Richard Austin said mid-market businesses were a critical but often overlooked part of the economy. “Instead of focusing on expansion, many are being forced to absorb another economic shock against an already uncertain backdrop,” he said.
The findings add to growing concerns that geopolitical instability and persistent cost pressures could weaken investment and slow broader economic growth later in the year.
