70% of SMEs fear bankruptcy as Iran war hampers supply chains

UK SMEs trading internationally are facing a tipping point, with seven in ten warning they could be pushed into bankruptcy if disruption linked to the Iran war continues according to new research from SME funder Bibby Financial Services (BFS).

The data reveals the growing financial toll of the conflict on UK importers and exporters, with SMEs reporting average losses of £38,207 since the start of the crisis.

The findings, from BFS’s 2026 Trading Places Report, which surveyed more than 500 UK importers and exporters this month, paint a stark picture of mounting pressure. Nearly half of SMEs (48%) now say global conflicts are the single biggest economic challenge they face — up 10% since last year.

More than half (55%) say their business is in a more precarious position than when Russia invaded Ukraine in 2022, underlining how sustained global instability is compounding existing pressures.

Michael McGowan, Managing Director at Bibby Foreign Exchange, said “This is a new era of international trade in which businesses are no longer reacting to isolated shocks; they are operating within a continually volatile landscape shaped by geopolitical instability. UK importers and exporters were already operating under intense pressure from inflation, higher interest rates and the long-term effects of Brexit, and the Iran war has amplified every one of those challenges.

“Businesses are facing a stark choice: absorb rising costs and see margins collapse or pass them on and risk losing customers. With nearly a third absorbing the full impact, it’s clear many are taking the hit — but this isn’t sustainable, even in the short-term.”

Pressure on cash flow is intensifying, driven primarily by supply chain disruption. More than three in five SMEs (61%) say rising shipping and logistics costs, including energy and insurance, are the biggest contributors to financial strain.

The closure of key trade routes is having a direct impact, with 58% of firms saying disruption linked to the Strait of Hormuz has affected their business.

The impact is also rippling through currency markets. Over half (52%) cite oil and energy-driven inflation as their biggest foreign exchange risk, highlighting how geopolitical tensions are feeding directly into cost volatility and margin pressure.

Against this backdrop, SMEs are being forced to make increasingly difficult trade-offs. Over half (56%) say it is now harder than ever to budget for goods, while rising costs are forcing businesses to decide where the burden falls.

Almost four in ten (39%) are absorbing some costs while passing others on to customers, while 29% are absorbing the full increase themselves — putting margins under severe strain even as they seek to protect customer relationships.

The impact on trading behaviour is already clear. More than half of exporters (54%) expect overseas volumes to fall, while 56% say volatility is pushing them to refocus on domestic markets.

McGowan concluded “The risk environment for UK SMEs trading internationally is deteriorating by the day. Encouragingly, many are not standing still. We’re seeing businesses adapt, reviewing supply chains, managing their FX exposure more closely and strengthening working capital. In a trading environment characterised by persistent geopolitical disruption and market uncertainty, effective FX management is no longer optional — it’s a critical tool for protecting cash flow and profitability.”