UK firms halt investments and hiring as Iran war pushes up costs, bosses warn | Business
Bosses have warned that the worsening fallout from the Iran war is forcing businesses to halt investment and recruitment plans in Britain as Britain enters a period of renewed political and economic instability.
More than two months into the US-Israeli war against Iran, leading surveys of UK employers have shown companies are increasingly prioritizing cost management over growth as rising costs and global uncertainty take a toll on confidence.
More than half of medium-sized businesses said the biggest challenges they face as the conflict in the Middle East continues are high energy and fuel costs along with supply chain pressures, according to a survey by accounting firm BDO.
Business leaders have said companies are wary of investing in Britain, amid growing domestic political uncertainty as Keir Starmer’s Labor government prepares for a leadership challenge.
Richard Austin, a partner at BDO, said UK businesses were “struggling to absorb the latest economic shock in an uncertain global and political environment” instead of focusing on expansion.
The survey comes as Chancellor Rachel Reeves travels to Paris for meetings with G7 finance ministers to coordinate actions among the world’s most powerful countries to limit the economic effects of war.
Reeves is expected this week to announce the next phase of support for British households and businesses to ease the impact.
But bosses have warned that the damage from conflict in the Middle East is mounting. A separate report from the Chartered Institute of Personnel and Development, HR’s professional body, also found that UK employers are prioritizing cost management over growth.
Almost 60 per cent of employers cited costs as their main priority, as rising energy and supplier bills combined with higher labor costs driven by increases in employer national insurance and increases in the statutory minimum wage last year.
Another report from the Confederation of Recruitment and Employment showed that job creation is under threat; In the UK, the number of vacancies in April fell by 7.7% compared to March to 711,733, and by 5.6% compared to April last year.
Job postings for pilots, travel agents and train drivers fell the most, while job postings for nannies and babysitters, as well as sales managers and couriers, also increased.
Neil Carberry, chief executive of the REC, said: “The labor market is entering a more unpredictable phase after a solid start to the year.”
He said momentum slowed in April after a good start, reflecting “increased sensitivity to the conflict in the Gulf” as well as the timing of the Easter holidays.
Coupled with “sudden domestic political uncertainty”, he warned hiring could take a further hit in the coming months.
“The likely outcome will be a more unbalanced hiring environment, with some firms pulling back while others continue to support underlying demand,” he said.
BDO said some “bright spots” could emerge for the UK economy amid the Middle East conflict as some companies seek to protect their supply chains in light of geopolitical uncertainty.
Almost a third of business leaders told BDO they wanted to prioritize UK-based suppliers, and a further 28% were considering moving production to the UK or closer to home, potentially providing support to British manufacturers.
The UK economy has so far defied expectations of a weak first quarter due to the mounting effects of the Iran war.
Figures from the Office for National Statistics showed that gross domestic product rose by 0.3% in March.
This was a sign that despite rising oil and gas prices due to the closure of the Strait of Hormuz, the Iran war, which broke out on the last day of February, was not affecting activity for businesses and consumers as badly as expected.
But economists are pessimistic about the outlook for the rest of the year, saying some of the growth in the first three months could come from businesses and consumers stockpiling goods, fuel and raw materials ahead of possible supply shortages and higher borrowing rates.
