UK profit warnings hit 2-year high as Budget chaos looms

Profit warnings from UK-listed firms have surged to their highest level in nearly two years, reaching 65 in the third quarter — up from 59 in the prior period ^[1]. This marks the highest figure since late 2024, when businesses reacted to Labour’s first Budget under Rachel Reeves, which included £75 billion in tax increases. The trend continues as uncertainty mounts ahead of the autumn Budget under new Chancellor John Healey, with potential tax changes on banks, capital gains, and bookmakers under discussion — though these have not been confirmed.

EY’s analysis reveals that 54% of profit warnings cited ‘policy change and geopolitical uncertainty’ as the primary cause — the highest level in over 25 years of tracking ^[1]. The ongoing conflict in the Middle East was explicitly named in 38% of cases, driving surging oil and gas prices that are straining firms already burdened by the previous government’s employer national insurance rise and minimum wage increases.

Cost pressures remain a major factor, with 35% of firms citing rising expenses as a key driver ^[1]. EY warns that the government’s projected £24 billion fiscal headroom could shrink to a £7 billion shortfall if energy disruptions persist into next year. The report highlights that businesses have already absorbed significant increases in employment, regulatory, and investment costs, and further tax changes or delays in public spending could worsen the strain.

Andrew Wishart, senior UK economist at Berenberg, described Britain as a ‘high-cost island’ ^[1]. Bank of England governor Andrew Bailey has also warned of growing business pressure from inflation and supply shocks. Jo Robinson, EY-Parthenon partner, noted that the current economic environment is no longer demand-led, with supply-side disruptions — from labour shortages to tariffs and war — now central to business challenges ^[2].

With the autumn Budget approaching, industry leaders are urging the government to avoid further tax increases, stressing that ongoing uncertainty is already deterring investment and hiring ^[2]. EY warns that prolonged instability risks delaying contracts, capital allocation, and domestic and foreign investment ^[1]. The story was first reported by Daily Mail and The Independent.