Record Policy Concerns Drive Profit Warnings
UK-listed companies are issuing profit warnings at an increasing rate, with a record proportion blaming policy changes and geopolitical uncertainty for their financial challenges, according to reports. Analysis from EY-Parthenon indicates that 47% of the 64 companies that issued warnings in the third quarter cited these factors as primary contributors, marking the highest level since records began more than 25 years ago.
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The report states this represents a sharp increase from just 17% a year earlier, suggesting businesses are struggling to adapt to rapidly changing regulatory and trade environments. Sources indicate that companies continue to adjust to what analysts describe as “market shifts and external threats,” including emerging challenges in cybersecurity and other technological vulnerabilities.
Consumer Confidence Hits Multi-Year Low
Alongside policy concerns, consumer confidence has deteriorated significantly, with 19% of companies pointing to weaker consumer sentiment as a contributing factor to their profit warnings. According to the analysis, this represents the highest share since the final quarter of 2022, when soaring energy costs and the cost of living crisis severely constrained household budgets.
Jo Robinson, partner at EY-Parthenon, suggested that persistent uncertainty affecting businesses was “spreading to households.” The report shows that per capita household consumption in the UK remains below pre-pandemic levels, representing the weakest performance among G7 advanced economies.
Mounting Cost Pressures on Businesses
Companies reportedly face multiple cost pressures that have intensified since April, including higher employer national insurance contributions, minimum wage increases, and rising trade tariffs. These challenges come amid broader structural shifts across global markets that are reshaping business operations.
Christian Mole, EY-Parthenon partner and UK and Ireland head of hospitality and leisure, indicated that companies in consumer-facing sectors were “heavily exposed” to increased business costs. “Companies from across consumer-facing sectors are reporting more selective spending, delayed purchases and trading down to lower-cost options,” he added, highlighting how these market trends are affecting business performance.
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Sector-Specific Impacts and Warning Trends
The analysis revealed that profit warnings were most prevalent in software and IT services, with 10 warnings issued in the quarter. Media and construction and materials sectors followed with six warnings each, while listed retailers issued nine profit warnings—the highest number since the end of 2023.
More than half of retail companies cited weaker consumer confidence, while a third of all companies issuing warnings in the third quarter referenced contract and order cancellations or delays. Twenty-two percent specifically mentioned tariff-related impacts, including weaker demand and supply chain disruption.
Budget Concerns and Future Policy Changes
Analysts suggest more policy changes may be forthcoming as Chancellor Rachel Reeves faces the dual challenge of boosting economic growth and addressing public finances in the November 26 Budget. The chancellor is widely expected to raise taxes to fill a fiscal hole estimated between £20 billion and £30 billion, raising concerns about further pressure on consumer finances.
These fiscal challenges come amid ongoing government considerations regarding economic policy and international relations. The combination of elevated inflation, high interest rates, rising unemployment, and tax concerns has created what sources describe as a perfect storm for both businesses and households.
As companies navigate these complex challenges, many are looking toward technological solutions to improve efficiency and adapt to the changing economic landscape. However, the immediate outlook remains challenging, with the report showing the number of profit warnings increased from 59 in the previous quarter, indicating deteriorating business conditions across multiple sectors.
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