EY-Parthenon report says rising costs and policy changes also behind jump

Listed construction firms issued 18 profit warnings last year – more than three times the five that were recorded in 2024.

Research from EY-Parthenon said companies in the FTSE construction and materials sector put out the highest number of warnings since the 33 recorded in the pandemic-hit year of 2020.

It added the sector ranked third‑highest for warnings last year, behind only software and computer services (30) and industrial support services (23).

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EY said construction firms issued 18 profit warnings last year, significantly up on the five put out the year before

The leading factors behind profit warnings from listed construction companies were contract and order cancellations or delays, cited in half (50%) of all warnings, policy change and geopolitical uncertainty (28%) and rising costs (17%).

EY’s UK and Ireland turnaround and restructuring partner Tim Vance said: “FTSE construction and materials companies continue to be significantly impacted by delays in contract starts or slippage in project timelines, which are impacting revenues, disrupting delivery and straining working capital across the supply chain.

“Increasing regulatory complexity – particularly relating to the Building Safety Act – continues to slow approvals, while legacy liabilities and labour shortages are also weighing on margins, with rising employment costs adding further pressure.”

But he said there were signs of hope for firms in the months ahead with increased infrastructure spending, lower borrowing costs and easing inflationary pressures.

Overall, UK listed companies issued 240 profit warnings last year which was the lowest annual total since 2021 when 203 warnings were recorded.

Meanwhile, a new report from Currie & Brown has said UK construction costs will rise 3.6% this year.

The firm’s chief operating officer for the UK and Europe, Nick Gray, said: “Uncertainty is holding the market back. Many projects are only just viable, so development is moving carefully, often step by step.”

And he added: “The autumn Budget did little to shift that trajectory. It fell short for construction, offering no new tax incentives, increasing pressure through wage and tax changes, and providing scant detail on housing or digital infrastructure investment.”