Director Weekly  IoD data shows that business confidence is up but supply chain concerns are growing.

The Index stands at -64 in April, up from -76 in March. Business leaders’ confidence in their own organisations also rose to +8, from -2 in March. Most underlying indicators increased to a small degree.

Yet there is clear potential for the economic disruption caused by the Iran war to get much worse. One in five (20%) stated that their organisation had already experienced shortages because of the conflict, of which a third (32%) judged them significant. The most common impact was on fuel or energy (55%), but industrial materials (38%), and components or parts (34%) have also been hit.

Meanwhile, over half of directors (52%) are worried about shortages impacting their business in the coming months: 76% of this group are concerned about fuel or energy, 35% about components or parts, and 34% about industrial materials. Yet only 37% have taken, or are planning to take, action to mitigate the impact of shortages on their business.

The sense that emerges is that for some companies, the situation created by the Iran conflict is becoming normalised. Concerns remain acute in many sectors – yet boards can’t just keep hitting pause on critical decisions. At some point, the brakes have to come off. And some investments – in AI, say, or diversification into international markets – are becoming more appealing amid the ongoing uncertainty.

That uncertainty was at the heart of the Bank of England’s decision this week to hold interest rates at 3.75%. It was really the only viable option. The Bank is walking a perilous tightrope as it attempts to control inflation while minimising the impact on unemployment; it would be all too easy to tip one way or another. Note that both the Fed and the ECB took the same view this week in their decisions to hold steady on rates.

More significant, perhaps, was the Bank’s updated forecast for UK growth – and the three scenarios it outlined as it grapples with the potential impact of the war. The Bank’s pre-war forecasts were for 0.9% growth in 2026 and 1.5% in 2027; now, it forecasts 0.8% this year and 1% next. Yet this could be 0.7% and 0.8% if the situation worsens.

And while the Monetary Policy Committee (MPC) opted to keep its powder dry for now, there is clearly potential for major changes in direction. The Committee indicated that it will act “forcefully” if oil reaches $130 a barrel and prices remain high; then, later on Thursday, prices hit a four-year-high of $126 on fears about the possible resumption of fighting. The Bank’s position could change quickly.

The stark reality, of course, is that the MPC has no more certainty about the future than business leaders. It can chart the likely impact of the very significant problems we already face; modelling potential scenarios is a useful way for both policymakers and business leaders to make sense of what might happen.

But the raw truth is that we are at the mercy of decisions being made far away, beyond the UK’s control. The outlook will remain deeply uncertain until the conflict is resolved.