UK profit warnings hit two-year high as Middle East conflict drives up business costs

EY-Parthenon records 65 warnings in third quarter; housebuilders surpass 2008 pace ahead of 28 October budget

By LineZotpaper

Published19 October 2026

Updated19 October 2026

Read Time3 min

Sources3 outlets

UK-listed companies issued profit warnings at the highest rate in two years during the three months to September, consultancy EY-Parthenon said, as the war in the Middle East drives up business costs barely a fortnight before Chancellor John Healey's 28 October budget.

UK-listed companies issued 65 profit warnings in the three months to the end of September, the highest quarterly total in two years, as the war in the Middle East pushed up costs for businesses, according to an analysis by the consultancy EY-Parthenon.

Rising costs were the leading factor for 35% of the warnings, while 38% specifically cited the impact of the conflict. Almost one in five (17%) of all UK-listed businesses have now issued at least one profit warning in the past 12 months.

The figures land less than a fortnight before Chancellor John Healey delivers his tax and spending statement to the Commons on 28 October. Business leaders are pressing for an emergency support package to soften the impact of soaring fuel and energy bills. Healey has pledged to use the budget to give households and businesses "breathing space", but has warned that the government's resources are limited as the conflict pushes borrowing costs to their highest level in decades.

According to the EY-Parthenon analysis, housebuilders have already issued more warnings this year than during the 2008 financial crisis. The sector issued six warnings between July and September, taking its 2026 total to 14, past the 10 recorded in 2008. The FTSE sector issuing the most warnings in the quarter was household goods and home construction.

Jo Robinson of EY-Parthenon said: "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. Businesses have shown considerable resilience, but the pace of policy change is making forecasting, investment and capital allocation much harder."

On the housing market, Rightmove said average asking prices for newly listed homes rose 1% to £371,015 in October, but are down 0.1% over the past year. Average two-year fixed mortgage rates have risen to 5.55%, from 5.29% last month and 4.25% before the United States and Israel attacked Iran in February, adding about £250 to average monthly payments on a new loan.

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

Healey is preparing to use the budget to cut business rates for small companies, raising the threshold at which they start paying from £12,000 to £18,000, a move first reported by the Sunday Times that would honour a promise made by Andy Burnham in his Makerfield byelection campaign.

The Trades Union Congress, which last week published figures showing UK households have paid almost £14,000 on average in extra costs for mortgages, loans, energy and water bills over five years, urged the chancellor to launch a cost of living support package funded by higher taxes on wealth and the banking industry. A scheme to help first-time buyers is also expected to be announced in the budget.

Analysis

Why This Matters

Profit warnings are a leading indicator of stress across the UK economy, showing that the Middle East conflict is now feeding through to company earnings, and ultimately to investment and jobs.
The data lands days before the 28 October budget, sharpening the choice facing the chancellor between emergency support for businesses and households and fiscal restraint.
Households are already feeling the squeeze through higher mortgage and energy costs, and the TUC is calling for a funded cost of living package.

Background

The UK is approaching its autumn budget against the backdrop of a war in the Middle East that began with the US and Israeli attack on Iran in February and has since pushed up energy and fuel costs while driving government borrowing costs to levels not seen in decades.

Separately, the housing market is cooling as mortgage rates climb, with average two-year fixed rates rising from 4.25% before the conflict to 5.55%. The budget is expected to address business costs, with a planned change to the business rates threshold for small companies, and a first-time buyer scheme pledged during Andy Burnham's byelection campaign.

Key Perspectives

Business leaders: Pressing the chancellor for an emergency support package to soften the impact of soaring fuel costs and energy bills. EY-Parthenon's data shows rising costs and policy uncertainty are making forecasting, investment and capital allocation much harder.

The government: Chancellor Healey has pledged to use the budget to give households and businesses "breathing space" and is planning business rates relief for small firms. But he has warned that the government has limited resources to intervene, with conflict-driven borrowing costs adding to pressure on public finances.

Trade unions and households: The TUC points to almost £14,000 in average additional household costs over five years and urges a support package funded by higher taxes on wealth and the banking industry. Its figures highlight the strain on consumers, who ultimately bear the cost of higher prices.

What to Watch

The 28 October budget: whether the business rates threshold rise to £18,000 and the first-time buyer scheme are confirmed as reported.
Mortgage rates: whether the climb from 5.29% to 5.55% continues, further cooling the housing market and squeezing buyer budgets.
Profit warnings: whether the quarterly total rises again as companies factor in policy changes announced in the budget.

Sources

Profit warnings from UK-listed firms at highest level in two years as Iran war drives up costs · World news | The Guardian
Profit warnings from UK-listed firms at highest level in two years as Iran war drives up costs · Business | The Guardian
Profit warnings from UK-listed firms at highest level in two years as Iran war drives up costs · UK news | The Guardian

Checked

12 claims in this story checked against 1 source: 10 supported.

Show each claim

Partly supportedUK profit warnings hit a two-year high, with the rise attributed to the Middle East conflict driving up business costs (headline and opening).UK news | The Guardian: “as the war in the Middle East triggers a surge in costs for businesses before the budget”
Partly supportedUK-listed companies issued profit warnings at the highest 'rate' in two years during the three months to September.UK news | The Guardian: “the number of profit warnings from UK-listed companies has risen to the highest level in two years”
SupportedUK-listed companies issued 65 profit warnings in the three months to the end of September.UK news | The Guardian: “companies quoted on the London stock market had issued 65 warnings in the three months to the end of September”
SupportedChancellor John Healey delivers his budget on 28 October, less than a fortnight after the figures.UK news | The Guardian: “Healey has pledged to use his 28 October budget to give households and businesses “breathing space””
SupportedRising costs were the leading factor for 35% of warnings, and 38% specifically cited the Middle East conflict.UK news | The Guardian: “Rising costs were the leading factor for 35% of the warnings issued, while 38% specifically cited the impact of the conflict in the Middle East.”
SupportedHousebuilders have issued 14 warnings in 2026, already past the 10 recorded in 2008, after six between July and September.UK news | The Guardian: “whose 2026 total has reached 14 so far – already past the 10 in 2008, the peak of the global financial crisis”
SupportedJo Robinson of EY-Parthenon said profit warnings linked to policy change have become a regular feature of the data and that the pace of policy change is making forecasting much harder.UK news | The Guardian: “the pace of policy change is making forecasting, investment and capital allocation much harder.”
SupportedAverage asking prices for newly listed homes rose 1% to £371,015 in October but are down 0.1% over the past year.UK news | The Guardian: “average asking prices for newly listed homes had risen by 1% to £371,015 in October. However, over the past year, house prices are down by 0.1%.”
SupportedAverage two-year fixed mortgage rates rose to 5.55%, from 5.29% last month and 4.25% before the US and Israel attacked Iran in February, adding about £250 to monthly payments on a new loan.UK news | The Guardian: “average two-year fixed mortgage rates have 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 average monthly mortgage payments for a new loan.”
SupportedHealey is preparing to raise the small business rates threshold from £12,000 to £18,000, a move first reported by the Sunday Times that would honour a promise by Andy Burnham in his Makerfield byelection campaign.UK news | The Guardian: “the planned change, first reported by the Sunday Times, would result in the threshold at which small firms start paying business rates rising from £12,000 to £18,000”
SupportedColleen Babcock of Rightmove said the rapid rise in mortgage rates is beginning to hit buyers' budgets.UK news | The Guardian: ““The rapid rise in mortgage rates is really beginning to hit buyers’ budgets.”
SupportedThe TUC figures show UK households have paid almost £14,000 on average in extra costs over five years, and the TUC urged a support package funded by higher taxes on wealth and banking.UK news | The Guardian: “urged the chancellor to use his budget to launch a cost of living support package funded by higher taxes on wealth and the banking industry”