UK Businesses Bracing for Tough 2025 Amid Profit Warnings and Economic Uncertainty
Economic Outlook Dims as Profit Warnings Reach Highest Level Since 2020
British businesses are preparing for a challenging 2025, with profit warnings reaching their highest level since the height of the Covid-19 pandemic in 2020. According to research from EY’s consulting arm, one in five UK-listed companies issued a profit warning in 2024, marking the third highest proportion in 25 years.
Contract Delays and Rising Costs Weigh on Corporate Profits
The primary sources of pressure on corporate profits were contract and order delays or cancellations, cited in 34% of 2024’s profit warnings, followed by increasing costs, which accounted for one in five of the profit warnings issued throughout the year.
Luxury Brands and Retailers Among Those Issuing Profit Warnings
Several high-profile companies, including luxury car maker Aston Martin, fashion house Burberry, and home builder Vistry, were among those issuing profit warnings last year. The retail sector was particularly hard hit, with 38% of FTSE-listed retailers cutting their profit guidance in 2024.
Business Confidence Plummets Amid Economic Uncertainty
The Confederation of British Industry (CBI) reported that the UK’s private sector is expecting another significant fall in output over the coming three months, leading to more price increases and a decline in hiring. The organization’s monthly Services Sector Survey showed hiring intentions in the British services sector had weakened significantly.
Government Policies Under Fire
The Labour government’s fiscal policies, including plans to raise taxes by £40 billion through a raft of new policies, have come under criticism from businesses. The hike in employer National Insurance payments has been particularly contentious, with companies warning that they will be less likely to take on new workers.
Experts Weigh In on UK Economic Outlook
Marc Ostwald, chief economist and global strategist at ADM Investor Services, attributed the squeeze on profit margins to inflation, a rising minimum wage, and increasing NI payments. Matt Collingwood, managing director of British recruitment firm VIQU Group, predicted low business confidence would hit hiring in 2025. Michael Queenan, CEO and co-founder of British tech data firm Nephos Technologies, described the government’s budget as a “massacre for businesses.”
Gloomy Outlook for UK Businesses
As the UK economy continues to struggle, businesses are bracing for a tough 2025. With profit warnings at an all-time high, contract delays, rising costs, and government policies weighing on corporate profits, the outlook for UK businesses looks increasingly uncertain.
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