Half of Scottish businesses grapple with extra costs and pressures caused by Middle East conflict
Many firms considering measures such as putting up prices and delaying hiring more workers
More than half of Scottish businesses say a combination of supply chain pressures and higher energy and fuel costs are among their biggest challenges as they grapple with the impact of conflict in the Middle East
A survey by accountancy and advisory firm BDO LLP of mid-sized businesses with revenues between £10m and £500m found factors such as material delays and costs, stock shortages, and suppliers folding were a top concern for two in five Scottish business leaders.
Mid-market companies are a key segment of the Scottish and UK economy, contributing more than £1.8 trillion in revenues and accounting for one in three private sector jobs. However, the current geopolitical climate could damage growth plans.
As a result of ongoing uncertainty, more than three quarters of mid-sized companies (76 per cent) in Scotland intend to halt or reduce investment as they wait for the situation to stabilise.
These pressures could leave companies making difficult decisions behind the scenes. Businesses are considering steps such as increasing customer costs (30 per cent) and delaying or reducing hiring plans (32 per cent).
James Paterson, head of tax at BDO in Scotland, said: “The mid-market is vital to Scottish and wider UK growth. These companies are an overlooked engine of our economy, but 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 Scottish business leaders.”
A separate report found eight in 10 UK firms are suffering a hit from the Iran war and a fifth of businesses are putting investment plans on hold because of the geopolitical uncertainty.
The latest Barclays Business Prosperity index revealed 80 per cent of UK businesses reported a negative impact from the Middle East conflict.
More than two-thirds (64 per cent) said energy and fuel costs were impacting on their business, with 34 per cent hit by higher shipping and logistics costs and a third suffering supply chain disruption, the report found.
In a sign of the knock-on effect on consumers, 37 per cent of the 1,000 senior company decision makers surveyed for the report between April 17 and May 5 said they expect to pass on cost hikes to customers through higher prices.
Analysis of Barclays data from around 900,000 businesses showed small companies in particular are taking action in the face of uncertainty and cost pressures, with a 13.1 per cent drop in borrowing during the first three months of 2026 and 1.5 per cent increase in savings as they look to build up a buffer.
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.”
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 per cent) firms are planning to increase their cybersecurity investment over the next year, while recent spending on AI has seen more than half (61 per cent) now claim to be using agentic AI in their operations.
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