Profit warnings hit highest level since 2024 as Budget uncertainty bites

Profit warnings by UK-listed firms have surged to the highest level for nearly two years as Budget uncertainty bites.

The number of warnings rose to 65 in the third quarter, up from 59 in the previous three-month period, according to analysis by accounting giant EY.

It was the highest level since the end of 2024 – when stunned businesses were reacting to Labour’s first Budget under Rachel Reeves.

Reeves put taxes up by £75 billion over the course of two Budgets before being sacked by Andy Burnham.

Now there are fears that even more pain is to come under her successor John Healey, with a raid on banks, capital gains tax, and bookmakers all possible.

That will add to the costs headache facing firms already being pummelled by the impact of Donald Trump’s Iran war, which has resulted in surging oil and gas prices.

Many are also still counting the cost of an employer national insurance raid as well as steep rises in the minimum wage under Reeves, both of which have made it more expensive for firms to hire.

EY’s analysis showed 35 per cent of firms cited cost as a leading factor in profit warnings.

But the main factor was ‘policy change and geopolitical uncertainty’, cited in 54 per cent of warnings – the highest level in more than 25 years of EY’s analysis.

The report said that while the UK economy had remained ‘more resilient than many expected… momentum remains fragile’.

It noted that growth remained ‘slow, uneven and vulnerable to disruption’, with consumers and businesses contending with higher costs.

The Budget adds a ‘further layer of uncertainty’, the report added. EY predicts that the government’s £24 billion ‘headroom’ against meeting fiscal rules could turn into a £7 billion black hole if the war in the Middle East continues to choke off energy supplies into next year.

That has narrowed the government’s choices as Chancellor John Healey seeks to balance the books – threatening more pain that may leave firms struggling.

‘Businesses have already absorbed substantial increases in employment, regulatory and investment costs,’ EY said.

‘Further tax rises, policy changes or delays to public spending could place additional pressure on exposed sectors, whilst prolonged uncertainty risks delaying hiring, domestic or inbound investment and contract awards.’

It comes days after Bank of England governor Andrew Bailey warned that UK business is already feeling the squeeze from surging costs.

And Andrew Wishart, senior UK economist at Berenberg, said the increasing burden had turned Britain into ‘high-cost island’.