British firms have been plagued by profit warnings and sliding output — and many aren’t hopeful for an imminent recovery


British firms have been plagued by profit warnings and sliding output — and many aren’t hopeful for an imminent recovery

Published Tue, Jan 28 20253:47 AM EST British businesses are expecting more price rises, further hiring cutbacks and continued output declines to weigh on profits in 2025, despite assurances from the government that it is aggressively pursuing growth-friendly policies. Profit warnings from companies listed in the U.K. were rife last year, new data showed on Monday. One in five U.K.-listed companies issued a profit warning in 2024, according to research from accounting giant EY’s consulting arm. It marked the highest proportion of London-listed firms issuing profit warnings in one year since the height of the Covid-19 pandemic in 2020 — and the third highest in 25 years. Over the past quarter century, only 2020 and 2001, when the Sept. 11 terrorist attacks and the dotcom bubble weighed on markets, saw bigger percentages of FTSE-listed firms issuing profit warnings, EY-Parthenon said. Last year, 274 profit warnings were issued, according to the report, with 71 issued in the fourth quarter. Contract and order delays or cancellations — cited in 34% of 2024′s profit warnings — were the biggest source of pressure on corporate profits, the data showed. Meanwhile, increasing costs were behind one in five of the profit warnings issued throughout the year, according to EY researchers. Luxury car maker Aston Martin, fashion house Burberry and home builder Vistry were among the London-listed companies to issue profit warnings last year. But certain industries saw a particularly high influx of profit warnings in 2024, EY-Parthenon said on Monday. Thirty-eight percent of FTSE-listed retailers cut their profit guidance last year, while 75% of companies in the personal goods sector cautioned investors about their profit outlook. Jo Robinson, EY-Parthenon Partner and UK&I turnaround and restructuring strategy leader, said in a news release on Monday that profit warnings linked to contract and spending delays hit record levels in 2024, as businesses held back from recruitment and investment. She noted that while the pace of profit warnings had eased slightly in early 2025, more business stakeholders were “viewing insolvency processes as a real option in finding the best path forward.” On Monday, Morgan Stanley downgraded its 2025 growth outlook for the U.K. from 1.3% to 0.9%, citing emerging labor market weakness and non-essential business spend cuts. “We see risks as tilted heavily to the downside,” the investment bank’s analysts said. Slump in output In separate data published Monday, the Confederation of British Industry (CBI) — which represents 170,000 U.K. firms — said the U.K.’s private sector was expecting “another significant fall” in output over the coming three months that could lead to more price increases and a decline in hiring. “January’s Growth Indicator showed that the private sector expects the downturn in activity to continue through the first quarter of 2025, extending a period of weakness that began in mid-2022,” the CBI said in its report. “Anecdote tells us that the mood among businesses is cautious, with sentiment having dipped in the aftermath of the Budget.” The CBI said businesses expect selling prices will rise in the first three months of 2025. Meanwhile, the organization’s monthly Services Sector Survey showed hiring intentions in the British services sector had weakened significantly.