Policy change and geopolitical uncertainty emerged as the leading drivers of profit warnings among UK-listed companies in 2025, highlighting the fragile operating environment facing corporate Britain as it enters the new year.

According to the latest analysis from EY-Parthenon, more than two in five profit warnings issued last year cited political and geopolitical factors as a primary cause. At 42 per cent, this represents a sharp increase from 12 per cent in 2024 and the highest proportion recorded for this category in more than 25 years of data.

In total, UK-listed firms issued 240 profit warnings in 2025, including 55 in the final quarter. While this marked the lowest annual figure since 2021, EY-Parthenon said the apparent slowdown masked continued underlying pressure. Almost a fifth of listed companies issued at least one warning during the year, broadly unchanged from 2024.

Alongside policy and geopolitical risks, contract cancellations and order delays were the second most common trigger, cited in a third of warnings. Weaker consumer confidence and rising costs were also significant factors, each referenced in around one in 10 cases.

Jo Robinson, UK and Ireland financial restructuring leader at EY-Parthenon, said the data pointed to “an uneasy pause rather than a turning point”. She said companies were grappling with the effects of trade tensions, fiscal uncertainty and changes to employer National Insurance contributions, while adjusting to slower global growth and rapid technological change.

“Many firms have shifted from hoping for a return to previous norms to recalibrating for a more volatile, lower-growth environment,” she said, adding that restructuring activity was likely to increase as pressures intensified.

Retailers and technology companies were among the hardest hit. Software and computer services firms issued the most warnings, followed by industrial support services and retailers. When supermarkets and personal care groups were included, more than a third of listed retail businesses warned on profits during 2025, the fourth consecutive year above that level.

Silvia Rindone, UK and Ireland retail lead at EY, said the sector remained under strain from weak demand, rising costs and intense competition. Consumers, she said, were increasingly trading down and delaying purchases, while retailers faced growing pressure to invest in digital and artificial intelligence capabilities.

She added that widening gaps were emerging between businesses able to fund technological upgrades and those struggling to keep pace with faster-moving rivals.

EY-Parthenon said the outlook for 2026 remained finely balanced between the prospect of renewed confidence driven by falling interest rates and a more pessimistic scenario marked by slow growth and heightened volatility. For many companies, the firm concluded, navigating geopolitical and policy risk will remain central to financial performance in the year ahead.