More than half of North West businesses say a combination of supply chain pressures and higher energy and fuel costs are among their biggest challenges as they grapple with the impact of conflict in the Middle East, according to new research from accountancy and advisory firm BDO LLP.

The bi-monthly survey of mid-sized businesses with revenues between £10m and £500m, has revealed that supply chain pressures including material delays and costs, stock shortages, and suppliers folding were a top concern for nearly a third of North West business leaders (30%) as they navigate this latest economic shock.

Mid-market companies are a key segment of the regional and UK economy, contributing more than £1.8 trillion in revenues and accounting for one in three private sector jobs. However, the current geopolitical climate could impact future growth plans within the region.

As a result of ongoing uncertainty, more than half of mid-sized companies (58%) in the North West intend to halt or reduce investment as they wait for the situation to stabilise.

These pressures could leave companies making difficult decisions behind the scenes. Businesses are considering steps such as increasing customer costs (61%) and reducing headcount (36%) as a result.

However, a re-evaluation of priorities could also present growth opportunities, as companies seek to shore up their supply chains in light of ongoing pressures.

Nearly half of business leaders in the region are looking to prioritise UK-based suppliers (45%), and a further 39% are considering onshoring or nearshoring, in a move that could provide a boost to North West manufacturing.

Last week, BDO’s monthly Business Trends report revealed that its Output Index had risen slightly in April, fuelling suggestions that businesses were frontloading resources ahead of suspected volatility expected later in the year.

As a result of these challenges, business leaders in the region are looking to the government for additional support in case of further escalation. Popular policy or support measures for the next 12 months include transport and fuel cost relief, business rates relief and dedicated supply disruption support (eg the creation of new grants for businesses that are materially impacted).

Angela Cross, regional managing partner at BDO in the North West, said: “The mid-market is vital to the North West and wider UK growth. These companies are an overlooked engine of our economy, but instead of focusing their sights on expansion, they are struggling to absorb the latest economic shock in an uncertain global and political backdrop.

“Mounting pressures around energy, fuel costs and supply chains, which were issues affecting businesses even before the conflict in Iran, are only adding to the sustained feeling of uncertainty amongst regional business leaders.

“The government must ensure it listens to the wants and needs of North West business leaders in this crucial segment. Addressing these challenges head on could be the key to providing the stability needed to reignite the region’s economic growth.”