Listed retailers in the UK issued seven profit warnings in the second quarter of this year, more than double the number recorded in the previous quarter amid growing economic uncertainty.
EY-Parthenon’s latest Profit Warnings report shows three of the warnings came from personal care, drug and grocery store operators – a sector that only saw four warnings in the whole of 2024.
Silvia Rindone, EY Partner and UK&I Retail Lead, noted that the increase in warnings reflects both weaker consumer demand and deeper structural challenges. “Retailers we speak to tell us that falling sales are currently indicative of a longer-term shift, with consumers becoming more value-focused and less brand-loyal, which leaves cost-pressured retailers in a bind,” she said.
Rindone also highlighted that, despite current pressures, including higher National Insurance contributions, increased National Living Wage rates, and tariff costs, investment in technology, such as AI, remains vital. She suggested that retailers who focus on their core strengths, such as product range, customer service, and pricing, while also building leaner, more digitally resilient models, are most likely to succeed.
Across the UK market as a whole, a total of 59 profit warnings were issued by listed companies in the second quarter of 2025, representing a 20% year-on-year increase. Almost half of these warnings (46%) cited policy change and geopolitical uncertainty as the key reasons. That’s a jump from just 4% during the same period last year and the highest level recorded for this cause in more than 25 years of EY’s reporting.
Other leading causes of profit warnings included contract and order cancellations or delays, which were cited in 40% of cases, matching record highs. Additionally, 34% of warnings were related to tariff issues, including reduced demand, supply chain disruptions, and currency fluctuations.
Jo Robinson, turnaround and restructuring strategy leader at EY, concluded: “The latest profit warnings data reflects the scale of persistent uncertainty and how heavy it continues to weigh on UK businesses.
“While the announcement of global tariffs has clearly played a part in amplifying uncertainty, they are just one factor among broader geopolitical and policy upheaval.
“These pressures are often interlinked and, combined, they are having a significant effect on companies’ confidence, decision-making and spending.
“Whether the rise in profit warnings is cyclical or structural remains to be seen, and we still expect earnings pressure to ebb and flow with the macroeconomic backdrop.”
NAM Implications:
- Patently important to continuously monitor your credit exposure for each customer.
- This means calculating the incremental sales required to replace lost profit in the event of any customer going bust.
- i.e. divide the average amount outstanding by your net margin for that customer and multiply by 100…
- …equals incremental sales required.
- Whilst keeping in mind that in cases of flatline demand…
- …any real growth comes at the expense of rivals.
- i.e. sharpen your competitive edge…
