London, United Kingdom – A significant and trending concern has emerged in the business news landscape, as UK-listed companies reported a substantial 20% year-on-year increase in profit warnings during the second quarter of 2025. This alarming rise underscores the persistent and intensifying challenges facing the United Kingdom’s corporate sector, driven by a complex interplay of geopolitical tensions, policy shifts, and domestic economic pressures.
According to the latest Profit Warnings report from EY-Parthenon, 59 profit warnings were issued by UK-listed businesses between April and June 2025, a notable jump from 49 in the same period last year. The data also reveals a broader trend: nearly one-fifth (19%) of all UK-listed companies have issued at least one profit warning over the past 12 months.
Geopolitical Storm and Policy Headwinds Intensify
The primary catalyst behind this surge in warnings is identified as policy change and geopolitical uncertainty, cited in almost half (46%) of all alerts. This marks a dramatic increase from just 4% in Q2 2024 and represents the highest percentage attributed to this cause in over 25 years of EY’s analysis.
Experts at EY-Parthenon, including Jo Robinson, Partner and UK&I Turnaround and Restructuring Strategy Leader, emphasize that while uncertainty has been a recurring theme since mid-2024, it has escalated significantly this year, compounding pressure on earnings and forecasts. The announcement of global tariffs, notably those threatened by the US administration in April, played a significant role, directly contributing to a spike in warnings, with companies such as TT Electronics and shipbroker Clarksons feeling the impact.
Beyond tariffs, broader geopolitical upheaval is creating a challenging forecasting environment. Furthermore, contract and order cancellations or delays remained a record concern, cited in 40% of warnings, while tariff-related impacts, including weaker demand, supply chain disruptions, and exchange-rate volatility, were mentioned in one in three (34%) warnings.
Domestic Pressures and Sectoral Strains
Compounding external pressures are internal cost escalations within the UK. Businesses have grappled with rising labour costs, including increased National Insurance contributions for employees and a significant hike in the National Living Wage, which came into effect in April. These domestic factors are squeezing profit margins, adding to the toxic cocktail of challenges faced by companies.
The impact has been acutely felt across specific sectors. Industrial Support Services recorded the highest number of warnings with eight, followed closely by Software and Computer Services with six. The retail sector also showed significant vulnerability, issuing four warnings from FTSE Retail companies, which rose to seven when including the FTSE Personal Care, Drug and Grocery sector. This figure represents more than double the retail warnings seen in Q1 2025, highlighting softening consumer demand and deeper structural headwinds. Silvia Rindone, EY Partner and UK&I Retail Lead, noted a shift towards more value-focused and less brand-loyal consumers, leaving many cost-pressured retailers in a bind.
Broader Economic Landscape
The surge in profit warnings unfolds against a backdrop of a mixed economic outlook for the UK. While some forecasts anticipate modest GDP growth for 2025, persistent inflationary pressures remain a concern, with inflation expected to peak mid-year and remain above the Bank of England’s 2% target into 2026 or even 2027. This inflationary environment, coupled with employment cost increases, has led the Bank of England to maintain a cautious stance on interest rate cuts.
Recent data points to a struggling economy, with a significant contraction in consumer sentiment and a four-year high in the unemployment rate. Furthermore, UK payrolls have contracted by over 184,000 since October 2024, with a large concentration of job losses in the retail and hospitality sectors.
Navigating Persistent Uncertainty
The findings from EY-Parthenon underscore the urgent need for United Kingdom businesses to adopt robust strategies to navigate this period of heightened uncertainty. Companies are advised to implement measured, scenario-based approaches that balance agility with clear strategic direction. Investment in technology, including artificial intelligence, remains crucial for building leaner, more resilient business models.
As the business news continues to evolve, the current climate demands that companies not only manage immediate pressures but also plan for a future where geopolitical and policy shifts are increasingly intertwined with economic performance. The ability to adapt quickly to evolving trade policies, manage supply chain vulnerabilities, and cater to changing consumer behaviours will be paramount for corporate survival and success.
