Britain’s economy was firing on more cylinders than the City had dared hope in the weeks before Israel and Iran went to war, but small and mid-sized businesses should brace themselves for a sharp turning of the tide.

Figures from the Office for National Statistics released this morning show gross domestic product expanded by 0.5 per cent in February, trouncing the consensus forecast of 0.1 per cent pencilled in by economists polled ahead of the release. January’s reading was also nudged higher, from flat to 0.1 per cent growth, lending weight to the argument that the economy had genuine momentum heading into the spring.

Taken together, the three months to February produced growth of 0.5 per cent, up from 0.3 per cent in the preceding quarter — a respectable clip by the standards of a British economy that has spent much of the past two years trudging along the margins of recession.

Grant Fitzner, chief economist at the ONS, pointed to a broad-based services recovery as the principal driver, noting that car production had also bounced back after last autumn’s cyber attack knocked output sideways. The construction sector, long the weak link in the chain, managed a 1.0 per cent rebound.

For owner-managed firms across retail, hospitality and professional services, the ecosystem that accounts for the lion’s share of the 80 per cent of GDP represented by services, the February numbers will feel like vindication after a bruising winter of weak consumer demand and punishing borrowing costs.

The trouble is that the figures are already yesterday’s news. The Iranian conflict, which erupted on 28 February, has rewritten the economic script in a matter of weeks.

Brent crude has climbed 30 per cent since hostilities began, feeding straight through to forecourts and utility bills. The effective closure of the Strait of Hormuz, through which roughly a fifth of global seaborne oil and liquefied natural gas passes, has rattled supply chains from Felixstowe to Southampton and left importers scrambling to renegotiate contracts.

Yael Selfin, chief economist at KPMG, warned that February’s bounce would prove “short lived”, with elevated energy costs and shipping disruption likely to act as a drag on output for much of the second quarter. Even as hopes grow of a diplomatic off-ramp, she cautioned that normalising freight flows and energy production takes time, time that cash-strapped SMEs working on thin margins can ill afford.

The inflation picture has deteriorated accordingly. With the headline rate already sitting at 3 per cent, the Bank of England now expects CPI to climb as high as 3.5 per cent over the coming six months; the International Monetary Fund has gone further, pencilling in a peak of 4 per cent. Only weeks ago, Threadneedle Street had been guiding towards a return to the 2 per cent target from April.

Against that backdrop, the Bank’s Monetary Policy Committee voted in March to hold Bank Rate at 3.75 per cent, pausing the easing cycle to see how the oil shock feeds through. For smaller businesses hoping for cheaper debt to refinance Covid-era loans or invest in growth, the reprieve they had been banking on is now firmly on ice.

Most City economists expect the March GDP print to come in flat or negative, marking the beginning of what some are already calling a period of heightened fragility — or, in the worst case, outright stagflation, that toxic combination of stagnant output and rising prices that policymakers spend their careers trying to avoid.

“The February GDP print marks the calm before the storm,” said Sanjay Raja, chief UK economist at Deutsche Bank.

The IMF has confirmed as much. This week the fund downgraded its UK growth forecast for the year to 0.8 per cent, down from the 1.3 per cent it projected in January, and warned that Britain faces the biggest hit of any G7 economy from the Middle East conflict, a function of the country’s heavy reliance on imported energy and its exposure to global services demand.

Rachel Reeves, the chancellor, has already conceded that the war will “come at a cost” to households and businesses, language that suggests the Treasury is laying the ground for a difficult summer.

James Murray, chief secretary to the Treasury, struck a more defiant tone, insisting that “growth only happens when the economy is on solid ground” and that the government’s plan to “restore stability, boost investment and deliver reform” was the right course for a “stronger, more resilient Britain”.

For the millions of SME owners who drive the bulk of private sector employment, the message from the data is uncomfortably clear. The foundations laid in February were encouraging, but the storm that followed has changed the weather entirely, and the businesses best placed to weather it will be those that move quickly to hedge energy exposure, shore up working capital and pressure-test their supply chains before the second-quarter numbers lay bare just how much damage has been done.

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European aviation is staring down the barrel of a fuel crisis that could ground flights across the continent by June, the International Energy Agency has warned, with reserves thinning at an alarming pace and replacement supplies proving stubbornly difficult to secure.

In its latest monthly oil market report, the Paris-based watchdog, which counsels 32 member states on energy security, said Europe was sitting on roughly six weeks’ worth of jet fuel. Unless the bloc can source at least half of the volumes it would ordinarily draw from the Middle East, stocks will hit a critical threshold within weeks.

The warning comes as the Strait of Hormuz, the artery through which the bulk of Gulf jet fuel flows to international markets, remains effectively shut. Iran moved to close the waterway more than six weeks ago in retaliation for joint American and Israeli military strikes, and the blockade has sent kerosene prices soaring and rattled airline finance directors from Luton to Lisbon.

Speaking to the Associated Press, IEA executive director Fatih Birol did not mince his words: flight cancellations, he cautioned, could be weeks away if the taps remain shut.

Historically, Europe has leaned on the Gulf for around three-quarters of its imported jet fuel. The IEA noted that refineries in other major exporting nations, South Korea, India and China chief among them, are themselves heavily reliant on Middle Eastern crude, meaning the disruption has, in its own phrasing, jammed the gears of the global aviation fuel market.

European buyers are now scrambling to plug the gap. American refiners have sharply accelerated jet fuel exports in recent weeks, but the IEA reckons that even if every barrel leaving US shores were routed to European airports, it would cover only a little over half the shortfall.

Under the agency’s modelling, a replacement rate below 50 per cent would trigger physical shortages at selected airports, forcing cancellations and what analysts politely term “demand destruction”. Even if three-quarters of the missing volumes can be replaced, the same squeeze is expected to bite by August. The upshot, the IEA concluded, is that European markets will need to hustle considerably harder to attract cargoes from alternative sources if inventories are to hold through the summer peak.

The financial strain on carriers is already acute. Fuel typically accounts for between 20 and 40 per cent of an airline’s operating costs, and the benchmark European jet fuel price touched a record $1,838 (£1,387) per tonne at the start of April, more than double the $831 recorded before hostilities erupted.

Brussels, for its part, is treading carefully. The European Commission said this week there was no evidence of shortages within the EU but conceded that supply issues could surface in the near future. A spokesperson confirmed that crude flows to European refineries remained stable with no immediate need to tap strategic reserves, adding that oil and gas coordination groups were now meeting weekly. Commission president Ursula von der Leyen is expected to unveil a package of energy measures next week.

The mood at Europe’s airports is less sanguine. Airports Council International, the continent’s airport trade body, wrote to the Commission last week warning that fuel shortages could materialise unless the Strait of Hormuz reopens within three weeks.

The pressure is already showing on airline balance sheets. In a trading update on Thursday, EasyJet said it had absorbed £25m of additional fuel costs in March alone as a direct consequence of the Middle East conflict, and that was despite the Luton-based low-cost carrier having hedged more than three-quarters of its jet fuel requirement at pre-war prices. The airline flagged near-term uncertainty over both fuel costs and passenger demand, a combination that rarely bodes well for earnings.

For SME operators in the aviation supply chain, ground handlers, charter firms, regional carriers and the small logistics businesses that depend on dependable air freight, the coming weeks will be a test of cash reserves and commercial nerve. With prices at record highs and supply far from guaranteed, the summer schedule is shaping up to be the most precarious Europe’s aviation sector has faced in a generation.

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It has secured backing in a round led by the Development Bank of Wales

Cardiff-based property tech venture Openmoove is looking to scale-up following a £700,000 equity investment round boost.

The tech start-up has secured £350,000 equity from the £20m Wales Technology Fund, managed by the Development Bank of Wales, matched with a £335,000 investment from early-stage venture firm, HAATCH and a group of Welsh angel investors. The deal marks the second time HAATCH and the Development Bank have invested together.

Founded in 2024 by Ross McKenzie and Cai Gwinnutt, Openmoove has developed a business to business platform designed to streamline the workflows of estate agents, conveyancers and mortgage brokers, helping reduce administration, improve communication and make property transactions easier to manage for all parties involved.

It has spent the last 18 months building and refining its product, testing it with early customers and securing commercial interest from major estate agency groups and conveyancers. The investment will now enable the business to scale up its team, accelerate market activity and roll out the platform more widely.

The funding is expected to create six jobs in Cardiff in the coming months. Chief executive Mr McKenzie brings extensive experience in the property sector, having held senior roles at Purplebricks and Countrywide before founding Cardiff-based estate agency Isla-Alexander. The firm’s chief technology officer Mr Gwinnutt, brings 20 years of experience across start-ups and engineering, with previous roles including OnExamination, Amplyfi, Cyber Innovation Hub and Tramshed Tech.

Mr McKenzie said:“We’ve spent the last 18 months building the product, working closely with estate agents, conveyancers and mortgage brokers, and proving there is real demand for a better way to manage the property transaction process. This investment gives us the backing to scale up, build our team in Cardiff and start rolling the platform out more widely.

“We’re proud to be building Openmoove in Wales. This is a Welsh business, founded by two people who have grown up and built their careers here, and we’re excited to be creating jobs in Cardiff as we move into the next phase of growth.”

Mr Gwinnutt added:“Our focus has been on creating technology that fits around the systems professionals already use, rather than forcing them to change behaviour or adopt a completely new way of working. We’ve developed a market-ready product, tested it with early customers and are now in a strong position to accelerate our growth.“This funding allows us to keep building with intent — expanding the team, strengthening the platform and taking a product that will improve the way property transactions happen.”

Mike Rees, investment executive at the Development Bank of Wales, said: “Ross and Cai have combined deep sector knowledge with strong technical expertise to build a compelling platform in a large and important market. They have made significant progress in a short space of time, developing the product, securing early commercial interest and setting out a clear route to growth.

“Our investment from the Wales Technology Fund will help Openmoove scale from Cardiff, create new jobs and build on the commercial foundations already in place. It is also encouraging to be investing alongside HAATCH again, demonstrating the value of co-investment in supporting ambitious Welsh businesses with high-growth potential.”

India’s mining and metals sectors are flashing opportunity signals, with spot price surges in coal and iron ore creating a compelling earnings catalyst for Coal India and NMDC, according to Siddhartha Khemka, Head of Retail Research at brokerage firm Motilal Oswal.

“Coal India is expected to see a 6% QoQ volume growth while NMDC is likely to see a strong 20% QoQ volume growth,” Khemka told ET Now, adding that rising e-auction premiums stand to materially boost Coal India’s profitability. The stock is his preferred pick within the mining space, underpinned by a structural demand thesis: India’s thermal power requirements are set to climb sharply, driven by an expected intense summer season and the longer-term electricity appetite of AI infrastructure and data centres.

Motilal is pencilling in approximately 9% sequential revenue growth for the sector, with realisations improving by Rs 4,000–5,000 per tonne on a sequential basis. Hot-rolled coil prices are seen rising by Rs 6,700 per tonne and rebars by Rs 10,000 per tonne. Base industrial metals are the standout performers — aluminium and copper are tracking 13%–16% sequential improvement, supported by constrained supply and robust global demand. Chinese export prices and EU prices have also firmed, with the latter up around 9% sequentially.

Within non-ferrous metals, Khemka singles out Nalco, citing strong alumina volumes, higher alumina prices, a debt-free balance sheet, and a multi-year capacity expansion roadmap. On the ferrous side, Jindal Stainless earns a place in his portfolio for its shift toward higher value-added products and its exposure to firming nickel prices. Alongside Coal India, these three names constitute his metals picks for the current cycle.

Banking: The Tide Turns Toward Private

The Q4 earnings season is set to expose a widening gulf between India’s private and public sector banks. Khemka projects aggregate earnings growth of roughly 12% year-on-year for private banks, against a meagre 2% for their PSU counterparts, a gap he attributes squarely to base effects and the NIM recovery dynamic now unfolding.
With the Reserve Bank of India having held rates steady, banks that spent much of the last financial year passing on cuts to borrowers are beginning to see margins stabilise and recover. “With the status quo maintained, they will be able to see a stronger NIM improvement,” Khemka said.
SBI remains Motilal Oswal’s top pick in the large-bank space. Khemka forecasts a 13% earnings CAGR over the next two to three years, with return on assets of 1.1% and return on equity of approximately 16% — all while the stock continues to trade at a meaningful discount to HDFC Bank and ICICI Bank. “Despite the ups and downs in the market, in the industry, in the environment, SBI has been delivering on a consistent basis,” he said.
ICICI Bank follows closely. After a period of valuation-driven caution, a time correction in the stock has brought multiples to more comfortable levels. Khemka sees domestic loan growth of around 12%, steady NIMs of approximately 4.3%, and best-in-class asset quality supporting a re-rating toward 2.2 times one-year forward adjusted price-to-book, up from current levels near 1.8 times.

Also read: Ola Electric vs Ather Energy: Which stock looks better after a stellar surge of up to 70% in April?

Autos Rev Higher; Consumption Stays Mixed

The auto sector delivered a strong Q4 on volumes, with the overall segment clocking 23% growth. Tractors led at 33%, followed by two-wheelers at 25% and commercial vehicles at 22%, the latter benefiting from a cyclical recovery. Passenger vehicles lagged at 15%. Input cost pressures are a headwind, but Khemka remains bullish on two-wheelers, tractors, and CVs as the three sub-segments to watch.

Within consumption, jewellery has proven resilient despite gold’s sharp rally, making Titan its top pick in discretionary. Radico Khaitan is expected to deliver strong numbers in the liquor space. Among staples, Marico screens well. Quick-service restaurants show early signs of recovery but face near-term uncertainty from LPG supply disruptions.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)