Iran conflict sends enterprise confidence to all-time low as corporations face billions in Labour’s price hikes

The Institute of Directors said bosses’ optimism about the economy had plunged in March as a result of the conflict in Iran

Business confidence has hit a record low as war in the Middle East sends costs surging – just as Labour has forced firms to pay billions in higher salaries and more taxes.

The Institute of Directors (IOD) said bosses’ optimism about the economy had plunged in March as a result of the conflict in Iran.

IOD chief economist Anna Leach said firms pointed to ‘sharp increases in fuel and shipping costs, rising material prices – such as petrochemicals – and delivery delays’.

She added: ‘Across all sectors, the general increase in uncertainty is once again delaying decision-making, as many wait to see how the conflict evolves.

‘Financial conditions are reported to have tightened, with investors pulling out of deals.’

Worries: The Institute of Directors said bosses’ optimism about the economy had plunged in March as a result of the conflict in Iran

It came as business groups warned that minimum wage and tax increases from today will pile further pain on ‘fragile’ employers and could crush jobs. Pub, restaurant and hotel businesses will be among the worst hit.

According to a poll by hospitality industry trade bodies, 64 per cent of firms in the sector will cut jobs as a result of the increases, and 51 per cent will cancel investment plans.

The survey, by UK Hospitality, the British Beer and Pub Association, the British Institute of Innkeeping and Hospitality Ulster, also found 42 per cent will reduce trading hours while 15 per cent of venues will be forced to close.

In a joint plea for help, they said: ‘Hospitality’s tax burden – the highest in the economy – is suffocating the sector.

The impact is clear: more lost jobs; less investment; and business closures.’ And increasing energy prices now threaten to ‘accelerate all of these impacts’, they added.

Today’s rise in minimum wage rates will see pay for 18 to 20-year-olds jump by 8.5 per cent to £10.85 an hour, while those aged 21 and over will get a 4.1 per cent hike to £12.71. 

Hospitality and retail trade bodies have warned that the increases will cost firms in those sectors £3.3billion over the next 12 months.

Meanwhile, many businesses will feel the pain of higher business rates. Ryan, a consultancy, has calculated that the overall bill will rise by £3.4billion.

The average English hotel’s bill will rise by 30 per cent, or £28,900, to £125,300 this April, and a typical restaurant faces an increase of £1,800 on the current average of £12,200, analysis by UK Hospitality showed.

A survey from the British Chambers of Commerce (BCC), largely carried out before the war started, found that even then ‘business sentiment remained fragile and stuck in a low-growth phase’. The poll pointed to pressure from high energy and labour costs.

And BCC head of research David Bharier said: ‘Businesses face a fresh wave of employer costs and burdens from this month, causing further pressure and uncertainty.’

UK-listed food and drinks firms yesterday flagged the impact of the Middle East war on costs, too.

Tinned tuna maker Princes said it was seeing ‘renewed inflationary pressures’ in its transport and logistics operations, while food manufacturer Hilton Food said ‘significant volatility’ remains within costs such as aluminium and fruits.

Irn-Bru maker AG Barr also said it was feeling a direct impact on the business through ‘energy cost spikes’ from the conflict.