Eight out of ten UK businesses are grappling with the fallout from the Middle East conflict, with a fifth freezing investment plans due to geopolitical uncertainty, according to the latest Barclays Business Prosperity index. The report found 80 per cent of British firms have reported a negative impact.
Rising Costs and Supply Chain Disruptions
More than two-thirds (64 per cent) are struggling with rising energy and fuel costs, while 34 per cent face higher shipping and logistics expenses, and a third are battling supply chain disruptions. This pressure is likely to affect households, as 37 per cent of the 1,000 senior decision-makers surveyed expect to pass these cost increases onto consumers.
Businesses Adapt to Uncertainty
Barclays data from around 900,000 businesses shows small companies are reacting to uncertainty by cutting borrowing by 13.1 per cent and increasing savings by 1.5 per cent in the first three months of 2026, building a financial buffer. Larger firms, however, are prioritising long-term investment, with a 6.9 per cent rise in longer-term borrowing and a 5.2 per cent drop in savings.
Matt Hammerstein, chief executive of Barclays UK Corporate Bank, said: “UK businesses are now operating in an environment where uncertainty has become the norm. Geopolitical instability and persistently high costs are feeding directly into cashflows, borrowing decisions and investment plans.”
Technology Investment Surge
But the data suggests larger corporates are doubling down on their spending on technology, in particular artificial intelligence (AI) and cybersecurity. Nearly seven in 10 (68%) firms are planning to increase their cybersecurity investment over the next year, while recent spending on AI has seen more than half (61%) now claim to be using agentic AI in their operations.
Mr Hammerstein called for an AI role to be created at the highest level of government, given the marked shift towards AI and Britain’s desire to be at the forefront of the new technology. He said: “AI is now a defining driver of productivity and global competitiveness, so elevating AI ministerial responsibility to Cabinet level would send a clear signal of the UK’s strategic intent. With a cross-cutting mandate to set strategy, co-ordinate departments, lead industry engagement and oversee crisis response, this would strengthen authority without duplication and position the UK to better capture the economic opportunities of AI as a global hub for innovation and growth.”
Results of the lender’s survey suggests investment in AI is paying off, with 52% of firm saying they believe AI and automation has improved their productivity, with 38% saying employees now spend less time on administrative tasks.
