UK business confidence jumps to 6.5 as demand offsets energy costs

UK business confidence climbed in the second quarter as resilient consumer demand offset elevated oil and gas prices from Middle East conflict uncertainty.

UK business confidence jumped in Q2, with the Logistics UK outlook index rising to 6.5 from 5.8, as firms bet consumer demand can offset elevated energy prices from Middle East conflict.

"After a difficult start to the year, it is encouraging that survey results for this quarter show that operators are starting to feel more confident about the state of business," Ben Fletcher, chief executive at Logistics UK, said.

The trade body's Logistics Performance Tracker found respondents' assessment of their financial health edged up to 7.5 from 7.2, even as transport costs scored just 11.5 out of 100. Some 57 percent of operators expect costs to rise in the short to medium term, while 70.4 percent predict higher international freight rates and 67.6 percent expect domestic prices to increase.

The confidence rebound carries implications for UK equities and the pound, as stronger business sentiment typically precedes increased capital expenditure and hiring. Yet with 44 percent of logistics operators reporting driver shortages and nearly a third struggling to recruit fitters, mechanics and technicians, labour constraints could cap the pace of expansion.

Transport Costs Score 11.5 Out of 100

Despite the improved outlook, operators remain cautious about the months ahead. Logistics UK said stronger demand across the economy risked being offset by tighter margins, particularly among road freight operators already working with limited financial headroom. Global shipping disruption remains another concern, with 26 percent of businesses reporting that conditions had worsened compared with the first quarter.

The cost picture extends beyond logistics. Deltek's survey of 375 senior decision-makers at architecture, engineering and consulting firms in the UK, Germany and Australia found that 78 percent expect profits to increase in 2026. Tighter controls over purchases and approvals were identified as the biggest driver of profitability by 34 percent of respondents, up from 26 percent in 2024, suggesting finance teams are paying closer attention to spending as margins come under pressure.

Driver Shortages Hit 44% of Operators

The labour market remains a structural constraint. Some 44 percent of logistics operators said they did not have enough professional drivers, while almost a third reported severe or very severe difficulties recruiting fitters, mechanics and technicians. Fletcher called for greater government support through infrastructure investment, improved access to skilled workers and policies that recognise logistics' role in supporting economic growth.

"Our sector needs the support of a policy framework that acknowledges the critical role that logistics plays in driving economic growth, alongside sustained public and private investment in infrastructure and a closer partnership between government and industry," he said.

The broader picture is one of cautious optimism. Business confidence has rebounded from a turbulent start to the year, when conflict in the Middle East pushed up fuel prices and operating costs. But with transport costs still scoring just 11.5 out of 100 and most operators expecting further increases, the recovery remains fragile. If energy prices stay elevated and labour shortages persist, the confidence gains could prove short-lived. If consumer demand holds and the economy remains resilient, the current trajectory could support stronger investment and hiring through the second half of 2026.

This article is for informational purposes only and does not constitute investment advice.