UK profit warnings hit near two-year high as businesses struggle with rising costs

New figures show 65 profit warnings from listed companies in the third quarter, with geopolitical uncertainty and soaring costs putting pressure on businesses ahead of the government’s autumn Budget

Profit warnings from UK-listed companies have reached their highest level in almost two years as rising costs, geopolitical uncertainty and weakening consumer confidence put increasing pressure on corporate earnings.

New research from EY-Parthenon, the consultancy arm of professional services group Ernst & Young, shows that businesses issued 65 profit warnings in the three months to the end of September, up from 59 in the previous quarter.

The total was the highest since the final quarter of 2024, when 71 warnings were recorded.

Policy changes and geopolitical uncertainty were the most commonly cited pressures, featuring in 54 per cent of warnings during the quarter.

More than a third, 38 per cent, specifically referred to the impact of the conflict in the Middle East, while 35 per cent cited rising costs as a leading factor.

The research also found that 17 per cent of all UK-listed companies had issued at least one profit warning over the preceding 12 months.

Jo Robinson, EY-Parthenon partner and UK and Ireland financial restructuring leader, said companies were facing an increasingly complicated economic environment.

She attributed much of the disruption since the pandemic to labour and material shortages, energy shocks, tariffs and geopolitical instability, rather than traditional fluctuations in consumer demand.

She said: “For much of the post-war period, the economy followed a familiar demand-led boom-and-bust pattern but, since the pandemic, supply-side disruption including material and labour shortages, energy shocks, tariffs and wider geopolitical disruption has become far more significant.”

The latest figures also reveal growing pressure on Britain’s housebuilding industry, where companies have been hit by rising construction costs, weak consumer confidence and higher mortgage rates.

Listed housebuilders issued six profit warnings during the third quarter, bringing their total for 2026 to 14.

That exceeds the 10 warnings recorded across the sector in 2008, during the global financial crisis, according to EY-Parthenon figures reported by The Guardian.

The difficulties follow an already challenging first half of the year. EY-Parthenon’s July analysis found that developers were increasingly offering incentives such as mortgage contributions, deposit support and part-exchange deals to attract buyers.

Those incentives have added to pressure on profit margins already affected by the cost of labour, building materials and finance.

The consultancy also identified wider problems for the housing industry, including subdued property transactions, planning delays, regulatory complexity and persistent skills shortages.

The findings come ahead of the government’s autumn Budget on October 28, with business groups pressing Chancellor John Healey to avoid further increases in corporate costs.

The Middle East conflict has added to these concerns through higher energy prices and disruption to international supply chains, while uncertainty over tax and spending policy has complicated financial planning.

Robinson said the increasing frequency of warnings linked to government policy and external events was making investment decisions more difficult.

“Businesses have shown considerable resilience, but the pace of policy change is making forecasting, investment and capital allocation much harder,” she said.

The government is considering measures aimed at easing costs for smaller businesses, including possible changes to business rates.

According to The Guardian, ministers are considering raising the threshold at which smaller commercial properties become liable for business rates from £12,000 to £18,000.

The proposal has not been formally confirmed and comes as the Chancellor faces competing demands for financial support amid high government borrowing costs.

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