UK business confidence has dipped – resilience remains, but geopolitics is testing decision making

Businesses aren’t pessimistic – they’re cautious.

That is the overriding message from the Thames Valley Chamber of Commerce’s Q1 2026 Quarterly Economic Survey (QES), which reveals a business community continuing to operate, adapt and trade – but with confidence still fragile. The Quarterly Economic Survey (QES) is a comprehensive study conducted every three months by the Chamber of Commerce, gathering feedback from businesses across the Thames Valley region. It tracks key indicators such as sales, orders, employment strategy, investment plans and overall business sentiment, providing a snapshot of the regional economic climate and highlighting challenges and opportunities faced by firms.

The survey shows many Thames Valley businesses reporting stable or improving activity, particularly in UK sales and orders. However, this resilience is being tempered by persistent cost pressures, uncertainty around interest rates and taxation, and an increasingly volatile global social and economic backdrop. As geopolitical tensions rise, businesses are taking a more defensive approach to growth and investment decisions.

A region holding its ground – but not accelerating

The Q1 QES paints a picture of cautious stabilisation rather than recovery.

There are some encouraging signals:

• 40% of businesses reported increased UK sales, and 36% saw UK orders rise, indicating underlying strength in domestic demand.
• Employment intentions remain broadly steady, with 28% of firms having increased headcount and 36% expecting growth in the months ahead.

Yet this strength masks deeper hesitation:

• 51% of firms are operating below full capacity, indicating spare capacity across the regional economy.
• Recruitment difficulties remain widespread, particularly for skilled, technical and managerial roles, constraining growth for many businesses.
• Cashflow and investment decisions remain cautious, with many firms choosing to defer major capital commitments rather than take on additional risk.

Why confidence feels fragile

While the QES fieldwork took place before the most recent escalation in the Middle East, the results already reflect a business environment on edge.

Labour costs continue to dominate as the most significant pressure on margins, followed by utilities, overheads and finance costs. Many businesses anticipate further price increases in the months ahead, reinforcing the sense that inflation risks have not yet eased.

Overlaying this is a growing awareness of geopolitical risk. Conflict in the Middle East is driving volatility in energy markets, supply chains and inflation expectations globally. For UK businesses, this has real-world implications:

• Increased energy and transport costs
• Greater uncertainty around interest rates staying “higher for longer”, with most economist prediction further rate rises later this year.
• More fragile supply chains and working capital pressures
• Reduced visibility when planning beyond the short term

The result is a widening confidence gap: many businesses feel capable of managing the present, but far less certain about the months ahead.

How the confidence gap shows up in practice

Across the Thames Valley, this fragility is already influencing behaviour:

• Investment plans are being delayed or scaled back
• Hiring decisions are more cautious, even where workloads support growth
• Capacity is being preserved rather than expanded
• Boards and owner-managers are seeking stronger evidence before committing to strategic change

This is not a loss of ambition. It is a rational response to uncertainty – both domestic and global.

Turning uncertain conditions into manageable decisions

In periods like this, confidence is no longer driven by optimism alone. It is built through clarity, data and challenge.

Businesses that are navigating uncertainty most effectively tend to focus on:

• Robust budgeting and forecasting, using scenario modelling to understand not just best-case outcomes but downside risks
• Clear, relevant KPIs that provide early warning signals on cashflow, margins and capacity
• Stress-testing working capital and funding arrangements, particularly where cost inflation, interest rates or supply disruption could bite
• Independent board-level insight and challenge, helping leaders sense-check decisions in an uncertain environment

This shifts decision-making away from instinct and towards evidence – giving leaders greater confidence to act, even when the external picture remains unclear.

How James Cowper Kreston supports businesses through uncertainty

At James Cowper Kreston, we work closely with owner-managed and mid-market businesses across the Thames Valley to help them stay in control when conditions are volatile.

In practice, that means:

• Helping management teams build credible forecasts and financial models that reflect economic and geopolitical risk
• Improving management reporting and performance visibility, so decisions are based on timely, meaningful information
• Supporting boards with independent insight, challenge and assurance at critical decision points
• Advising on cashflow, investment timing and risk exposure, enabling businesses to protect resilience while remaining ready to act when conditions improve

Looking ahead

The Q1 2026 QES confirms that Thames Valley businesses remain resilient – but that resilience is being tested by ongoing cost pressures and an increasingly unstable global environment. A sustained improvement in confidence is likely to depend on greater clarity around inflation, interest rates and geopolitical developments as the year progresses.

In the meantime, businesses that invest in visibility, planning and challenge will be best placed to navigate uncertainty – and to move forward with confidence when the outlook does improve.

If you would like to discuss how we can help your business, please speak to your usual James Cowper Kreston contact, or get in touch with our team here to find out how we can help you maximise your potential.