Fresh analysis has revealed that UK-listed companies issued profit warnings citing policy uncertainty and geopolitical turmoil at a record high level last year, highlighting significant challenges for businesses navigating domestic and international volatility.
Unprecedented Levels of Uncertainty Cited
According to new data from professional services firm EY, 240 companies warned investors that their profits would fall short of market expectations throughout the year. While this represents the lowest total number of warnings since 2021, when just 203 were recorded, analysts noted a dramatic shift in the reasons given.
Remarkably, two in five profit statements (42 per cent) specifically mentioned policy and geopolitical uncertainty as factors reducing profits. This marks a substantial increase from just 12 per cent of statements referencing uncertainty in 2024, when contract and order cancellations represented the primary driver behind profit warnings.
Domestic and Global Policy Challenges
The analysis identified several specific policy areas creating challenges for UK businesses. Examples cited include the ongoing motor finance debacle, international tariff disputes (including those implemented during the Trump administration), and increases to the national living wage. These factors combined to create what business leaders described as a perfect storm of uncertainty affecting profit projections.
EY's data provides crucial insight into how listed companies are performing across different sectors and which issues are holding back corporate growth. The findings suggest that policy instability has become a more significant concern than operational challenges for many UK businesses.
Sector-Specific Struggles Emerge
The technology sector proved particularly vulnerable, with approximately 30 profit warnings coming specifically from software and computer services companies. These new figures may concern investors who have taken optimistic positions on the artificial intelligence investment boom that has driven economic growth in both the UK and United States.
Some City analysts have begun suggesting that substantial AI expenditure may not deliver expected returns for all companies. Microsoft founder Bill Gates recently echoed this sentiment, warning that "it's going to be hyper-competitive" and that "a reasonable percentage of those companies won't be worth that much."
Retail Sector Under Pressure
The retail sector faced its own challenges, with another 23 profit warnings issued according to the analysis. This could potentially fuel criticism of the Labour government's business policies, though the data points to broader economic factors at play.
Weak consumer demand combined with higher operational costs through a record tax burden were identified as primary reasons for declining profit expectations across retail. EY partner Silvia Rindone noted that retailers are increasingly concerned about consumers "delaying their purchases" and becoming "more selective" with their spending.
"Mixed Christmas trading performances underlined these pressures and divergences," Rindone explained. "There is also a race to keep pace with rapidly evolving AI and agentic capabilities, which continues to create a widening gap between those able to invest in digital, AI and operational agility, and those struggling to hold their ground amid increasing market share of fast-moving, tech-savvy competitors."
The comprehensive analysis suggests that UK businesses face a complex landscape where policy uncertainty combines with technological disruption and changing consumer behavior to create unprecedented challenges for profit growth and corporate stability.
