EY: Profit warnings surge points to ‘economic shock’
Nearly one in five listed companies have told investors that they expected profits to decline in the past twelve months, new research has suggested, reflecting firms’ vulnerabilities to higher taxes and damaging tariffs.
Chancellor Reeves flattered investors in the run-up to last year’s election, calling Labour the “natural party of business”.
But a new report by EY-Parthenon has suggested that UK-listed companies are still reeling from years of slow growth.
More than 60 profit warnings were issued in the first three months of 2025, according to EY analysts, reflecting firms’ despondence about their business prospects.
It means that 18 per cent of listed firms have told investors that profits would be squeezed as cost pressures mount up.
Higher employers’ national insurance contributions (NICs) and the breakdown of global trade due to President Trump’s tariffs have wrecked companies’ hopes of boosting their income.
EY-Partheon partner Jo Robinson said that the UK-listed companies had seen period of turmoil sustain throughout the last five years.
“What we’ve seen over the last few years is that that consistent sort of level where it’s just one thing after the other that companies are having to grapple with,” she said.
Robinson also said profit warnings was consistent with that seen during periods of “economic shocks”, as in the 2008 financial crash or 2020 pandemic.
“When you start to see companies that have done multiple warnings, that’s where you start to see they might need to do something about this, and that’s where you do typically see a delay in things like an insolvency event,” Robinson said.
Businesses are closing down at the fastest rate since the pandemic, a City AM analysis found, as more than 1,1000 companies published insolvency notices in the first 15 weeks of 2025.
The horizon ahead looks even bleaker given Trump’s tariffs are likely to add to the build-up of pressures.
Claire Gambles, who is conducting EY-Partheon’s analysis of US tariffs on listed companies, said firms were making “big changes” to cope with trade disruptions with as many as half of firms issuing profit warnings in April blaming direct and indirect effects of tariffs.
“[There is] some hesitation with businesses as they kind of work out how to respond to these changes and manage the uncertainty,” she said.
“I think we’re going to see a permanent structural shifts in terms of how businesses trade, and where they trade.”