Business energy costs back at the centre of UK confidence and risk
May 2026
Updated on 13 May 2026 by:
Vander Caceres, Senior Market and Competitor Insight Manager
Business sentiment in the UK entered 2026 on uncertain footing - and the modest rebound seen at the start of the year is already fading.
A combination of persistent cost pressures and renewed geopolitical instability has pushed confidence indicators back towards multi-year lows.
For many businesses, energy costs remain a central and growing concern.
Confidence deteriorates as geopolitical risk returns
The Institute of Directors Economic Confidence Index illustrates just how fragile the recovery has been.1 After fluctuating throughout 2023 and 2024, confidence briefly turned positive in July 2024 - the only such reading in the past three years. Since then, sentiment has steadily deteriorated, with March 2026 marking the lowest level recorded since the index began in 2016.
UK directors economic confidence hits record lows (March 2023 - March 2026) 1
This decline has been exacerbated by geopolitical tensions, particularly in the Middle East, which have reintroduced volatility into global energy markets and weighed heavily on business expectations.
Optimism among CFOs remains low
A similar trend is evident in Deloitte’s quarterly survey. CFO optimism turned negative in Q4 2024 and has remained there ever since.2
By Q1 2026, sentiment had fallen to its lowest level since Q1 2020, underscoring the depth of concern among businesses.
CFO optimism falls to post-pandemic lows (Q1 2023 - Q1 2026)2
This sustained pessimism reflects a challenging operating environment where uncertainty is elevated and cost pressures remain entrenched.
Energy prices for business are increasingly shaping financial planning and risk assessments.
Rising energy bills place sustained pressure on businesses
Even before the latest shocks, energy affordability was a structural issue. Data from the British Chambers of Commerce shows that 27% of businesses reported difficulty paying their energy bills in early 2026.3
This provides important context. The survey does not fully capture the impact of the most recent surge in wholesale prices, suggesting that pressures could intensify further as the year progresses.
Energy bill affordability remains a persistent challenge (2022 - 2026)3
This is reinforced by recent data from the Office for National Statistics, which shows energy prices were already being cited by a growing share of businesses as a primary concern in March 2026, even before the latest escalation in global markets.4
For many firms - particularly SMEs - energy remains one of the most volatile and least controllable costs on the balance sheet.
Energy costs now shape business risk perceptions
Energy costs are now firmly embedded in business risk perceptions.
In Deloitte’s latest survey, rising energy prices ranked as the second greatest risk, behind geopolitics, with concern jumping from 47% in Q4 2025 to 70% in Q1 2026.2
Energy prices surge as a leading business risk (Q4 2025 vs Q1 2026)2
This sharp increase reflects both current cost pressures and uncertainty about future price trajectories - a combination that is complicating budgeting, pricing and investment decisions across sectors.
Businesses respond by prioritising financial discipline
In response, businesses are shifting their focus decisively towards cost control. Deloitte’s data shows that 68% of CFOs cite cost reduction as their primary priority over the next 12 months, up from 51% in the previous quarter.2
Cost reduction becomes the dominant business priority (Q4 2025 vs Q1 2026)2
This shift signals a more defensive stance, with firms prioritising resilience amid a highly uncertain outlook.
Mounting pressure as energy risks intensify
Taken together, these indicators suggest that the improvement in sentiment at the start of 2026 was always fragile.
Business Energy costs were already a significant burden for businesses, and recent market shocks have amplified both the scale of that burden and the uncertainty surrounding it.
As a result, business confidence is once again weakening, with cost pressures - and energy in particular - playing a central role in shaping expectations for the remainder of the year.
With energy costs continuing to influence confidence, risk and decision‑making, businesses are increasingly focused on steps that can reduce pressure and improve resilience, explore our Business Energy Saving hub to see where practical action can make a difference.
In this article
- Confidence deteriorates as geopolitical risk returns
- Rising energy bills place sustained pressure on businesses
- Energy costs now shape business risk perceptions
- Businesses respond by prioritising financial discipline
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