The ongoing conflict in Iran is having a significant impact on small and medium enterprises (SMEs) across Yorkshire, pushing up the cost of borrowing and creating a challenging environment for businesses to thrive. According to Mark Barrie, the head of debt advisory at the Yorkshire accountancy firm Azets, this situation could lead to some businesses facing serious financial difficulties.
Impact Of The Iran War
The war in Iran, which began in February 2026, is causing various economic pressures that are affecting SMEs in Yorkshire. Barrie explains that the conflict is likely to lead to unexpected increases in interest rates, which will make borrowing more expensive for businesses. This could result in reduced investment and, in the worst-case scenario, financial failure for some companies.
Barrie commented, “It is a tough time for SME businesses what with this and the knock-on effects of all the other pressures they are currently facing adding up to a big squeeze on margins, and it could well lead to casualties.” The uncertainty surrounding the conflict has left many business owners feeling anxious about their future.
Rising Costs And Financial Strain
Several factors contribute to the rising costs that SMEs are grappling with. A recent survey by the British Chambers of Commerce revealed alarming statistics:
- 80% of firms report an existing or expected impact from the Iran conflict.
- 68% of manufacturing firms are already affected by the unrest.
- 75% of businesses expect their energy bills to rise over the next year, with many anticipating increases of more than 20%.
- 36% of firms foresee difficulties in paying their energy bills in the coming 12 months.
These rising costs are not just limited to energy. Businesses involved in logistics and manufacturing, particularly those relying on goods transported through the Strait of Hormuz, are also facing delays and increased shipping costs. The Drewry World Container Index, which tracks shipping costs, recently reported a 6% increase in container prices, reaching $2,712 for a 40ft container, marking the highest levels since July 2025.
Advice For SMEs
Given these challenges, Barrie advises SMEs to closely examine their financial situations. He suggests that businesses should “lift up the bonnet and look underneath at the engine of the business” to assess their cash flows and forecasts. This careful analysis will be crucial when approaching lenders for finance, as it provides a clearer picture of their capabilities and needs.
The situation is particularly precarious for those considering taking on new debt to fund projects or expand operations. Barrie warns that while some may see borrowing as a solution, it could lead to further complications if they cannot manage the additional financial burden. He stated, “Some just think that loading additional debt is the answer out of this, but some of them just can’t afford the debt they are acquiring and this will be the final nail in the coffin.”
Long-Term Effects
The long-term effects of the Iran war on Yorkshire’s SMEs remain uncertain. With the Bank of England's base rate currently held at 3.75%, many economists predict that interest rates may rise further. This is a significant shift from earlier expectations that rates would decrease, making it more difficult for businesses to secure affordable loans.
Despite these challenges, Barrie pointed out a silver lining: many SMEs that took out loans during the COVID-19 pandemic will soon see those loans coming to an end, potentially easing some of their financial pressures. However, any new financing will likely come at a higher cost than before, which may deter businesses from making necessary investments.
As Yorkshire SMEs navigate this turbulent period, it is crucial for business owners to remain vigilant and proactive. Those experiencing financial difficulties are encouraged to seek professional advice as soon as possible to improve their chances of recovery. The current economic landscape is undeniably challenging, but with careful planning and strategic decision-making, businesses can still find ways to adapt and survive in these trying times.
