South West firms pause investment plans as Iran war uncertainty bites

Higher fuel costs and supply chain pressures are among the challenges facing businesses

Mid-sized businesses across the South West are reducing or pausing investment amid the global political uncertainty being caused by the Middle East conflict, according to new research.

Nearly three quarters of the businesses questioned in the survey by advisory firm BDO said supply chain pressures and higher energy and fuel costs were among the biggest challenges they faced.

The bi-monthly survey of companies with revenues of between £10m and £500m found material delays and costs, stock shortages and suppliers folding were a top concern for more than half (51 per cent) of leaders in the region.

Nearly three in five (59 per cent)of South West firms questioned said they intended to halt or reduce investment as they waited for the situation in the Middle East to stabilise.

As a result, the region’s companies are considering steps such as increasing customer costs (46 per cent) and reducing or not paying a bonus (46 per cent), BDO said.

More than two-fifths of the region’s business leaders are also looking to prioritise UK-based suppliers (41 per cent), and a further 36 per cent are considering onshoring or nearshoring, in a move that could provide a boost to South West manufacturing.

Andrea Bishop, regional managing partner at BDO in the South West, said: “The mid-market is vital to the South West and wider UK growth. Instead of focusing their sights on expansion, they are struggling to absorb the latest economic shock in an uncertain global and political backdrop.

“Mounting pressures around energy, fuel costs and supply chains, which were issues affecting businesses even before the conflict in Iran, are only adding to the sustained feeling of uncertainty amongst regional business leaders.”

According to BDO, South West business leaders are looking to the government for extra support in case of further escalation. Popular policy or support measures for the next 12 months include transport and fuel cost relief; measures to reduce employment costs; and dedicated supply disruption support such as grants for businesses materially impacted.

“The government must ensure it listens to the wants and needs of South West business leaders in this crucial segment,” Ms Bishop added.

“Addressing these challenges head on could be the key to providing the stability needed to reignite the region’s economic growth.”