Profit warnings hit a two-year high as war drives up costs

The number of profit warnings from companies listed on the London stock market has risen to its highest level in two years, as the war in the Middle East pushes up costs.

The consultancy EY-Parthenon says UK-listed companies issued 65 profit warnings in the three months to the end of September.

Why companies are warning

Policy changes and geopolitical uncertainty were the most commonly cited reasons. Rising costs were the main factor in 35% of warnings, and 38% specifically mentioned the conflict in the Middle East. Almost a fifth (17%) of all UK-listed companies have now issued at least one warning in the past 12 months.

"With the autumn budget around the corner, profit warnings linked to policy change and uncertainty, once concentrated around fiscal events or elections, have become a regular feature of our data," said Jo Robinson of EY-Parthenon. "Businesses have shown considerable resilience, but the pace of policy change is making forecasting, investment and capital allocation much harder."

Housebuilders hit hardest

Household goods and housebuilding was the sector with the most warnings between July and September, including six from listed housebuilders. Their total for 2026 has reached 14, already more than the ten issued in 2008 at the height of the financial crisis.

Separate figures from Rightmove show average asking prices for newly listed homes rose 1% to £371,015 in October, but are 0.1% lower than a year ago.

Mortgage rates rising

The average two-year fixed mortgage rate has risen to 5.55%, from 5.29% last month and 4.25% before the US and Israel attacked Iran in February. That has added about £250 to the average monthly repayment on a new loan.

"The rapid rise in mortgage rates is really beginning to hit buyers' budgets," said Colleen Babcock of Rightmove. "We're now seeing mortgage rate rises feed through to seller pricing in many of the cheaper parts of Great Britain."

Help on business rates

Business leaders are pressing the chancellor, John Healey, for help with soaring fuel and energy costs at his budget on 28 October. It emerged on Sunday that he plans to raise the threshold at which small firms start paying business rates from £12,000 to £18,000, helping thousands of shops, cafes, pubs and hairdressers. The change would honour a promise made by Andy Burnham during his Makerfield by-election campaign before he became prime minister.

A scheme to help first-time buyers, also promised by Burnham, is expected at the budget too.

What a profit warning is

Listed companies must tell investors promptly when they expect profits to fall significantly short of what the market expects. A rise in warnings is often an early sign of strain in the wider economy, before it shows up in official figures. For Birmingham's many small businesses, a higher business rates threshold could make a real difference to costs on the high street.