Britain’s finance chiefs have retreated into full defensive mode as the fallout from the war in Iran sends confidence tumbling to levels not recorded since the country was plunged into its first coronavirus lockdown more than six years ago.
Two of the most closely watched barometers of corporate sentiment, Deloitte’s monthly CFO survey and BDO’s output index, paint a picture of a business community bracing for prolonged turbulence rather than plotting for growth. The message from boardrooms is unambiguous: conserve cash, cut costs and wait for the storm to pass.
Deloitte’s survey places CFO confidence at a six-year low, with geopolitics once again cited as the single greatest external threat. The firm’s chief economist, Ian Stewart, said the Middle East conflict had delivered a genuine shock, dragging optimism back to the darkest days of the pandemic. For finance leaders accustomed to navigating uncertainty, the comparison is a sobering one.
BDO’s figures tell a similarly bleak story. Business output contracted last month for the first time since February 2021, with services and manufacturing bearing the brunt. Scott Knight, the firm’s head of growth, pointed to soaring energy and commodity prices as the principal culprits, noting that a fragile truce between Washington and Tehran had offered only fleeting respite.
The knock-on effects are already filtering through the economy
Higher commodity costs are eroding manufacturers’ margins, while both businesses and consumers have begun tightening their belts in anticipation of rising inflation. Deloitte found that business leaders are most anxious about the war’s impact on energy prices, inflation and interest rates, all of which economists now expect to climb this year. The spectre of increased cyber-attacks, potentially orchestrated by state-sponsored actors, is adding a further layer of unease.
The labour market is feeling the chill. BDO’s employment index has slumped to a 15-year low as firms signal that inflationary pressures will curtail their ability to take on new staff. Hiring demand, the accountancy firm warned, is likely to remain subdued for the remainder of 2026. A separate report from KPMG and the Recruitment and Employment Confederation found that permanent placements and worker demand continued to fall in March, albeit at a gentler pace than in preceding months. Wage growth, meanwhile, was described as marginal.
There is a slender thread of hope. Jon Holt, chief executive of KPMG, suggested that the prolonged decline in hiring activity may be starting to level off. Yet he was quick to caution that any meaningful recovery hinges on greater clarity over the trajectory of the conflict and its wider economic consequences. Without that, he warned, hiring decisions and capital investment risk being deferred once more, stalling any sustained improvement in the jobs market.
For now, the overwhelming priority among Britain’s finance chiefs, many drawn from the FTSE 100 and FTSE 250, is balance sheet resilience. The vast majority told Deloitte they intend to pare back both spending and recruitment in the months ahead. As Stewart put it, rarely in the past 16 years have UK CFOs been so single-mindedly focused on controlling costs.
It is a posture born not of panic but of hard-headed pragmatism
Until the geopolitical fog lifts and energy markets find some semblance of stability, corporate Britain appears content to hunker down and ride it out.
