Business confidence has fallen to its weakest level since the early days of the COVID-19 pandemic, Deloitte's latest quarterly survey of UK chief financial officers has shown. Net confidence among CFOs plunged to -57% in the second half of March 2026, a dramatic drop from -13% in the previous quarter and the lowest reading in six years, delivering a dramatic blow to Chancellor Rachel Reeves.

The survey, conducted between March 16 and 30, highlights how the conflict in the Middle East has reshaped corporate sentiment almost overnight. Ian Stewart, chief economist at Deloitte UK, said: "The conflict in the Middle East is reshaping business sentiment: it's created a shock to CFO confidence, lowering optimism to levels we haven't seen since the early days of the COVID-19 pandemic.

"Finance leaders are coping with high levels of external uncertainty, and their focus is on managing risks from geopolitics, rising energy prices and higher financing costs."

Geopolitical developments remain the single greatest external risk to UK businesses for the third consecutive year. This quarter they received a weighted average risk rating of 79, up sharply from 65 in the previous survey.

Higher energy prices or disruption to supplies jumped to a rating of 70 (from 47), while worries over further interest rate rises rose to 65 (from 44).

When asked about the consequences of adverse geopolitical developments over the next three years, CFOs' top concerns were rising energy costs (61%), inflation and interest rates (61%), and an increase in cyber-attacks (60% - up from 44% a year earlier).

In response, Britain's biggest companies are moving swiftly into cost-cutting mode. Cost control has become the overriding priority, with 68% of CFOs rating it a "strong priority" for the next 12 months - up from 51% last quarter. Cash conservation also rose in importance, cited by 43% (up from 36%).

Mr Stewart added: "Rarely in the last 16 years have UK CFOs been more focused on cost control than today. This challenging environment is prompting CFOs to scale back expectations for margins and sharpen their focus on cost reduction and cash conservation. The immediate priority for finance leaders is to strengthen balance sheets in the face of external headwinds."

Expectations for spending and hiring have deteriorated markedly. A net 46% of CFOs anticipate a reduction in capital expenditure, a net 72% expect a fall in discretionary spending, and a net 79% forecast lower hiring over the next year - the highest such reading since the second quarter of 2020 and up from 55% at the end of 2025.

The survey also showed companies' expectations for inflation in a year's time rising to 3.6%, the highest level since the third quarter of 2023. Some 61% of CFOs said they were "significantly concerned" about rising energy prices and inflation feeding through to higher interest rates.

The sharp deterioration comes at a difficult moment for Ms Reeves, with separate S&P Global business surveys also showing private-sector growth slowing to a near standstill in March amid rapidly rising cost pressures and higher public inflation expectations.

However, the labour market picture remains mixed. A separate survey from the Recruitment and Employment Confederation (REC) indicated that while hiring faced a headwind from the Gulf conflict in March, the overall trend of stabilisation seen so far in 2026 continued.

Neil Carberry, REC Chief Executive, said: "The Gulf conflict provided a headwind to hiring in March, but this did not stop the trend of stabilisation that has defined 2026 so far."

The Q1 2026 Deloitte CFO Survey is the 75th quarterly edition. It polled 79 CFOs and Group Finance Directors from major UK companies, including 12 from FTSE 100 firms and 29 from FTSE 250 companies.

The remainder came from other UK-listed firms, large private companies and British subsidiaries of major overseas-listed multinationals. The Deloitte CFO Survey is the only regular survey focused exclusively on major corporate users of capital, tracking attitudes to valuations, risk and financing.