British business morale slumped to its lowest depth since 2022 as the Iran war pushed up costs and drained expectations for future sales, a survey of UK accountants showed on July 2.
The Institute of Chartered Accountants in England and Wales (ICAEW) said that its quarterly Business Confidence Monitor fell to its lowest since the fourth quarter of 2022 in the three months to June.
It found that geopolitical risks linked to the Iran War were the most widely cited challenge to businesses’ performance in the country.
ICAEW chief economist Suren Thiru said that “even if the peace deal holds, the weakening in forward-looking sales indicators points to a difficult second half of the year for the UK economy, as the aftereffects of the Iran conflict continue to weigh on activity.”
The survey also found that export growth dipped in the second quarter of 2026, with annual expansion slowing to 3.1 percent and only just ahead of the historical norm of 3 percent.
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Forecasts for the year ahead were also down to 4 percent from 4.1 percent in the previous quarter, with businesses anticipating weaker international demand as the Iran War dragged on throughout most of the survey period.
The three “stress points” highlighted in the survey were energy costs, labor costs, and persistent late payments.
“The impacts of the Iran war are made worse when you factor in labor costs (as cited by 58 percent of respondents) and energy costs (55 percent), the latter linked to those geopolitical risks,” a report accompanying the survey said.
“Late payments also hit a five-year high, despite measures to reduce them—one-quarter of businesses (24 percent) cited it as a growing issue. Firms in the construction (37 percent), IT and communications (30 percent), and transport and storage (28 percent) sectors suffered the most late payments.”
ICAEW chief executive Alan Vallance called the findings “a sobering reminder of just how exposed UK businesses are to global instability.”
“The war in Iran has knocked confidence significantly, and the economic consequences are proving hard to shake,” he said, adding that the body’s research ”shows that most businesses are increasingly troubled by geopolitical risks, and frankly, it’s hard to see these worries easing until hostilities truly subside.”
Vallance called on the next British prime minister to focus on encouraging growth, including reducing the complexity, cost, and uncertainty that are holding businesses back.
Changing of the Guard
The UK is currently in the process of changing prime ministers, after Prime Minister Keir Starmer announced on June 22 that he would be leaving Downing Street.
On June 29, the man widely expected to replace Starmer in No. 10, former Manchester Mayor Andy Burnham, delivered a speech outlining his vision for the country.
During that speech, his first major event since returning to the House of Commons after being elected in a byelection on June 19, Burnham set out a 10-year mission to raise living standards across the UK.
He said that the country is “stuck in a rut” after two decades of low growth and criticized what he called the over-centralized government, departmental turf wars, and adversarial politics of Westminster for holding back progress.
Burnham also rejected the “trickle-down” economic model and called for a more collaborative, “place-first” approach, which he dubbed “Manchesterism” after the northern English city he led for nine years.
As part of this, he pledged “good growth in every postcode” through a major shift of power and resources from Whitehall to regions and mayors, with key proposals included creating a “[No.] 10 North” in Manchester to coordinate long-term economic strategy; giving local leaders greater control over housing, welfare, and education; launching a major council house-building program; and pursuing reindustrialization by making the UK a leading innovation nation.
The prime ministerial hopeful said these changes would harness both public and private investment to deliver regeneration and opportunity beyond London and the Southeast.
Burnham is currently the only Labour Member of Parliament (MP) to have declared that he will run for the party leadership and, therefore, the role of prime minister.