Sharp rise in profit warnings on London markets over tariffs

The London stock market experienced a significant increase in profit warnings last month, driven largely by tariff threats from the United States. Twenty-six companies listed in the UK issued profit warnings in April, reflecting a 24 per cent rise when compared to the same month in 2024, according to new research by EY.

Half of the affected companies attributed their lower-than-expected profits to disruptions caused by potential US trade tariffs and economic uncertainty. This sudden surge comes after a three-month decline in profit warnings and coincides with a shock announcement from the US administration on 2 April, dubbed “liberation day.” This policy shift caused substantial disruption as firms delayed listings and corporate acquisitions, fearing adverse economic conditions.

On average, share prices for companies issuing profit warnings last month dropped by 19 per cent on the day of the announcement. TT Electronics, a prominent manufacturer of advanced electronic products, and Clarksons, a ship-broker listed on the FTSE 250, were among the firms sounding the alarm. TT cited “heightened market uncertainty” due to US trade policies, while Clarksons estimated that its profits could decline by £9.5 million.

Jo Robinson, EY’s restructuring strategy leader, stated that the first quarter of 2025 now seems like a distant memory for companies contending with evolving global trade conditions. The quarter had displayed resilience, with profit warnings declining by 11 per cent to a total of 62. However, the more recent developments have exposed underlying vulnerabilities in the corporate sector. Robinson highlighted that UK firms have demonstrated considerable resilience during challenging periods, which should help them weather the emerging uncertainty.

Contract cancellations, order delays, and other unforeseen disruptions were responsible for 40 per cent of the profit warnings reported during the first quarter. This highlights how external factors continue to weigh heavily on business performance, especially when compounded by the prospect of significant changes to international trade policy.

Claire Gambles, a restructuring partner at EY, noted that while companies have grappled with cyclical disruptions like the pandemic and geopolitical crises, changes to trade policies may unleash more substantial and long-term consequences for markets, impacting profitability and overall investor confidence.