Key takeaways from the latest profit warnings report

EY-Parthenon publishes its profit warnings report on a quarterly basis⁽¹⁾. The report outlines the profit warnings issued by FTSE companies across different sectors and provides analysis on the driving factors behind them.

Profit warnings are statements issued to the stock exchange by listed companies to declare that their full-year profits will be materially below management or market expectations.

Lull in construction profit warnings masks impact of geopolitical pressures

New insight from EY-Parthenon shows that just one profit warning was issued by FTSE Construction and Materials firms in 1Q2026, down from four in the previous quarter and five in 1Q2025.

In the 12 months to 1Q2026, FTSE Construction and Materials firms issued 14 profit warnings, the fifth highest total of all sectors behind Media (16), Retailers (16), Industrial Support Services (19) and Software and Computer Services (27).

Meanwhile, FTSE Household Goods and Home Construction firms, which include housebuilders, issued four warnings in 1Q2026 – unchanged from 4Q2025 and one fewer than the same quarter last year.

The sector was among those that issued the highest number of profit warnings in 1Q2026, and those with the highest percentage of companies warning in the last 12 months.

^{Source: EY-Parthenon Profit Warnings Q1 2026}

Dr David Crosthwaite, chief economist at BCIS, said: ‘While the number of warnings issued by FTSE Construction and Materials firms eased in the first quarter, this should not be taken as a sign that pressures have dissipated. As EY-Parthenon’s report goes on to highlight, the sector and firms in adjacent areas like housebuilding, remain highly sensitive to shifts in financing conditions, input costs and demand, all of which continue to be shaped by a volatile macroeconomic backdrop.’

Geopolitical and policy uncertainty remained the dominant driver of warnings across all sectors in 1Q2026, cited in 49% of cases.

The report characterised the quarter as one of two halves. January recorded the lowest number of profit warnings issued by UK-listed companies since 2010, before March recorded a notable uptick, driven in part by the escalation of conflict in the Middle East.

^{Source: EY-Parthenon Profit Warnings Q1 2026}

Housebuilders and housing-exposed ancillary sectors, including those involved with building products, household goods and estate agencies, alongside capital-reliant sectors such as construction and real estate, were highlighted as particularly vulnerable to future funding pressures.

According to the report, FTSE Household Goods and Home Construction firms have been among the most challenged consumer-facing sectors over the past year.

Five of the 12 warnings issued by the sector in the 12 months to 1Q2026 came from housebuilders.

While some housebuilders have reported improved visitor numbers and enquiry levels, this has yet to translate into sustained increases in reservations or completions. EY-Parthenon insight suggests sales cycles remain extended, and forward visibility is still limited.

Adding further context, the report stated: ‘Builders have relied heavily on incentives such as mortgage contributions, deposit support and part‑exchange schemes to support volumes. These measures have helped stabilise activity but have diluted margins at a time when labour, compliance and financing costs are still elevated.

‘Optimism that easing inflation would deliver a clear path to lower interest rates has been challenged in recent week as inflation and rate forecasts have risen. Pricing power is still limited, while elevated financing costs, planning delays and regulatory requirements continue to weigh on earnings. Refinancing risk and covenant headroom are increasingly prominent themes in trading updates as the outlook has softened.’

Renewed pressures impacting construction and adjacent sectors could result in a repeat of profit warnings patterns seen in 2025.

Last year, FTSE Construction and Materials firms issued 18 profit warnings, the third highest of all sectors, behind Software and Computer Services (30) and Industrial Support Services (23).

By comparison, firms in the sector issued five profit warnings in the whole of 2024, less than one-third of 2025’s total.

^{Source: EY-Parthenon}

‘Early engagement between clients, contractors and supply chains and adjusting cost assumptions to reflect current market conditions remains critical. Firms that prioritise robust planning, realistic pricing and disciplined financial management will be better placed to navigate ongoing pressures and protect margins through 2026,’ Dr Crosthwaite added.

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^{(1) EY-Parthenon – Analysis of UK profit warnings- here}