Skyrocketing energy prices are hammering the confidence of UK businesses! The lowest reading in six years sounds the alarm for "cost cutting and cash preservation."

A large-scale enterprise survey report released on Monday showed that the confidence index of the UK's largest businesses has fallen to its lowest level since the outbreak of the COVID-19 pandemic as concerns about continuously rising energy prices and interest rates due to the Iran war that broke out at the end of February. A quarterly survey conducted by Deloitte, one of the four largest international accounting firms in the world, of UK chief financial officers showed that the net sentiment index plummeted from -13% at the end of 2025 to -57% in the second half of March, hitting the lowest reading since the outbreak of the COVID-19 pandemic in the first quarter of 2020. Deloitte stated that as the global energy prices surged significantly due to the deteriorating geopolitical situation in the Middle East, signs of global stagflation were becoming increasingly apparent, and global companies were rapidly shifting to cost-cutting mode, with the cost being recruitment, discretionary spending, and long-term investment planning. It is understood that the UK Chancellor of the Exchequer, Rishi Sunak, has previously viewed the Deloitte CFO Survey as an important indicator of UK business sentiment. Another corporate survey report released by S&P Global showed that as cost pressures rose rapidly, global private sector economic growth in March almost stalled, and public inflation expectations also rose significantly. Deloitte stated that 61% of the chief financial officers are extremely concerned about the rising energy prices, inflation, and even the potential "stagflation" that could lead to a rise in interest rates. After the weekend peace agreement between the US and Iran failed to materialize and negotiations were temporarily called off, investors are currently most concerned that the prolonged high costs of traditional energy sources near historic highs could exacerbate the already high price pressures, thus shattering the expectations of interest rate cuts by the Federal Reserve. The increasingly fragile ceasefire expectations between the US, Israel, and Iran are pushing global stock and bond traders to refocus their market trading on inflation, and significantly strengthening expectations that interest rate policies will remain hawkish near historic highs for a longer period of time (known as "Higher-for-Longer"). Prolonged high energy costs will significantly increase global price pressures that were already rising before the Iran war, leading to a reduction in expectations of interest rate cuts by the Federal Reserve and other global central banks due to expectations of inflation or even "stagflation". This may even lead to pricing the possibility of global central banks reintroducing interest rate policies, becoming the primary consideration for equities and bonds investors and professional traders. UK businesses' expectations for inflation a year from now rose to 3.6%, hitting the highest level since the third quarter of 2023. "In the past 16 years, UK CFOs have rarely been as focused on cost control and conservative measures to preserve cash as they are today," said Ian Stewart, Deloitte's Chief Economist in the UK. Stewart added, "This challenging environment is prompting CFOs to continuously lower their profit margin expectations and further focus on cost-cutting and cash preservation." Deloitte found that a net 79% of CFOs expect significant decreases in hiring over the next 12 months, significantly higher than the 55% at the end of last year. This ratio is the highest since the second quarter of 2020. However, another independent market survey of recruiting companies by the Recruitment and Employment Confederation showed that although the Iran war brought significant uncertainty, the UK's domestic labor market did not deteriorate further as pessimistically expected last month. However, overall labor force growth still appears weak compared to 2025. "The Middle East Gulf geopolitical conflict in March brought significant headwinds to recruitment, but this did not stop the stable employment market trend that has been present since 2026," said Neil Carbery, CEO of the Recruitment and Employment Confederation. Deloitte's survey of 79 CFOs took place from March 16th to 30th, with respondents including representatives from 12 important constituents of the FTSE 100 Index and 29 constituents of the FTSE 250 Index. The remaining respondents came from large private companies in the UK, other large listed companies or UK subsidiaries of large multinational corporations.