The ongoing conflict in Iran has had a profound impact on UK business, fuelling a surge in profit warnings across various sectors. According to a report by consultancy EY, UK-listed firms have issued 59 profit warnings in the first six months of this year, an increase from 55 in the same period last year. Crucially, over half of these warnings were directly attributed to geopolitical uncertainty and recent policy shifts.
Notably, since the conflict in the Middle East began in late February, its impact has been cited as a contributing factor in two out of every five profit warnings. Sectors most severely affected include housebuilders, retailers, and leisure firms, according to EY-Parthenon’s analysis. The housebuilding and construction sector has borne the brunt, issuing eight profit warnings in the first half of this year – six of which occurred in the second quarter alone.
This marks the highest number for the sector since the beginning of the pandemic and mirrors the first half of 2008, when the UK's housing market was significantly impacted by the financial crisis. Housebuilders have pointed to escalating building material costs and a notable slowdown in demand, particularly from first-time buyers, leading them to pause construction starts and land acquisitions.
Recent financial disclosures underscore these challenges: FTSE 250-listed Vistry reported a £30m loss for the first half of the year, while London-listed Crest Nicholson announced a £35m shortfall and is reportedly in discussions with its lenders. Since 2020, UK-listed housebuilders have collectively issued 47 profit warnings, almost double the 27 recorded in the preceding 13 years combined.
Tim Vance, a restructuring partner at EY, noted that many housebuilders had anticipated a gradual recovery in 2026 as interest rate pressures were expected to ease. However, he stated that "higher energy and input costs, weaker consumer confidence and fading expectations of further rate cuts have all weighed on the sector." This sentiment reflects a broader economic environment where external shocks are compounding existing pressures across various industries.
The UK’s travel and leisure industry has also felt the brunt of the geopolitical instability, issuing seven profit warnings – the highest number among any FTSE sector. Travel firms and airlines were among the first to experience the repercussions, with companies like Easyjet reportedly warning of reduced bookings and soaring jet fuel expenses. The pressure on these firms is becoming existential, with Easyjet facing an "opportunistic" bid on its depressed share price and poised for potential exit from the FTSE.
The retail sector is similarly struggling, with the Iran war being cited in all five profit warnings issued by London-listed companies. Analysts warn that if these pressures persist, further consolidation may be inevitable in the industry.