Rising costs force UK businesses to revise financial forecasts
British companies are increasingly warning investors about possible deterioration in financial results. In the third quarter of 2026, the number of such announcements reached its highest level in almost two years, driven mainly by geopolitical instability, rising energy prices, and growing operating costs.
This is according to a study by consultancy EY-Parthenon, released on October 19, reports The Guardian.
In July-September, companies listed on the UK stock market issued 65 profit warnings, compared with 59 in the second quarter. The current figure is the highest since the fourth quarter of 2024, when 71 warnings were recorded.
Businesses cite changes in government policy and geopolitical uncertainty as the main reason for deteriorating expectations. These factors were mentioned in 54% of warnings – a record share in more than 25 years of EY-Parthenon monitoring.
Moreover, 38% of the announcements directly linked the problems to the consequences of the war in the Middle East.
Another 35% of warnings referred to rising costs, the largest share since late 2022. Companies face higher energy, raw material, logistics, and financing prices, which negatively affects their profitability.
Other reasons include contract cancellations or delays, which were mentioned in 38% of warnings, and weakening consumer confidence, cited in 20%.
The most difficult situation is observed in housebuilding. In the first nine months of 2026, UK homebuilders issued 14 profit warnings, already exceeding the figure for 2008, when the sector issued ten warnings during the global financial crisis.
In the third quarter alone, builders made six such statements. Overall, the household goods and home construction sector was the leader in profit warnings, with eight in the quarter.
Industrial suppliers, business services, and building materials companies also face difficulties.
EY-Parthenon estimates that over the past 12 months, 17% of all UK listed companies have issued at least one profit warning.
EY-Parthenon partner Jo Robinson said businesses continue to show resilience, but constant changes in economic policy and external shocks make it increasingly difficult to plan investments and allocate capital.
Additional pressure on the construction sector comes from rising mortgage costs. According to property platform Rightmove, the average two-year fixed mortgage rate in the UK has risen to 5.55%, from 4.25% before the escalation of the Middle East conflict in February.
This increases costs for homebuyers and dampens demand for new builds. Rightmove estimates that average asking prices on the UK housing market have fallen by 0.1% over the past year.
Amid deteriorating business conditions, the UK government is preparing its budget on October 28. Finance Minister John Healey promised measures to support households and businesses but warned of limited fiscal room due to high government borrowing costs.
Among the measures being considered by the government is reducing the tax burden on small shops, cafés, and other service businesses. Final decisions are expected to be announced during the budget presentation.
Source: EY-Parthenon, The Guardian