Research shows that one in four consumers is holding back on spending as Chancellor of the Exchequer Rachel Reeves prepares to deliver her first full budget in November. The new administration faces the challenge of balancing its goals, stimulating economic growth, advancing green investment commitments, and managing a growing public debt burden.
Sixty-four UK companies released profit warnings in the third quarter
Source Cryptopolitan
UK-listed companies say changes in government policy and global instability made them issue profit warnings, with new trade rules and taxes adding to the strain.
During the third quarter, of the 64 companies that released warnings, 47% pointed to policy changes and global instability as the main cause. The share has surged from 17% last year to its highest point in over 25 years, based on EY-Parthenon data.
On the other hand, 19% of firms blamed declining consumer confidence, the most since late 2022, 22% referenced tariff-related impacts, while a third of the total pointed to contracts or orders being delayed or cancelled.
The risk-averse consumer mood was also evidenced in recent retail sales figures. UK retail sales growth eased in September with cautious consumers homing in on essentials and waiting before making discretionary purchases, new figures from the British Retail Consortium (BRC) show.
Total retail sales increased 2.3% on year, after rising 3.1% in August and 2.5% in July. Sales at established stores, which exclude new openings, also fell to 2% from 2.9%. Retailers blamed the weaker performance on stubborn inflation, uncertainty over imminent tax changes, and volatile weather conditions, all of which were undermining consumer confidence.
UK’s technology firms issued the most profit warnings in the third quarter
Jo Robinson, a partner at EY-Parthenon, said lingering uncertainty among UK firms is having an impact on households as companies adapt to market changes and external threats such as cyber attacks. Companies have been feeling cost pressure since at least April, when rising national insurance, higher minimum wages, and trade tariffs began to squeeze their expenses.
UK software and computer services firms issued the most profit warnings in Q3, per EY-Parthenon. The industry topped the list with 10 warnings, up from six in the second quarter.
Robinson explained that the software and computer services sector is being hit hard by contract cancellations and project delays. She stated, “As service providers to a wide range of industries, technology firms remain highly exposed to broader economic slowdowns and cost-cutting.”
Generative AI still serves as a double-edged sword for the sector — driving innovation and efficiency while heightening uncertainty and risk. Robinson explained that the speed of technological change is also making clients more cautious about new investments, while the rise of in-house capabilities is disrupting standard outsourcing and licensing practices.
With the November 26 Budget approaching, Chancellor Rachel Reeves faces the difficult task of boosting growth and fixing public finances, prompting expectations of further policy moves. She is already under pressure to raise taxes to plug a £20–30 billion deficit, though such measures risk dampening consumer confidence.
The UK’s media and construction firms also released profit warnings
Consumer sentiment in the UK is still weak as households grapple with inflation, costly borrowing, job losses, and looming tax increases. Household spending per capita in the UK remains lower than pre-pandemic levels, the weakest showing in the G7 group of advanced nations.
Monday’s report showed profit warnings rising from 59 in the prior quarter. Outside the tech sector, the media and construction and materials industries also reported a high number of profit warnings, with six each. Listed retailers issued nine profit warnings, the highest total since late 2023.
EY-Parthenon’s Christian Mole even said the hospitality and retail sectors are particularly vulnerable to cost increases, such as wage hikes, with many firms finding it hard to absorb them. He noted, “Companies from across consumer-facing sectors are reporting more selective spending, delayed purchases, and trading down to lower-cost options.”
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