Profit warnings issued by UK-listed companies with a DB pension scheme peaked in Q3 2024

• UK-listed companies with a Defined Benefit (DB) pension scheme issued 20 profit warnings in Q3 – the highest quarterly total in 2024 so far
• Profit warnings from UK-listed companies with a DB pension scheme made up 24% of the 84 profit warnings issued by UK-listed companies in Q3
• Almost a quarter (23%) of UK-listed companies with a DB pension scheme have issued a profit warning in the last 12 months

UK-listed companies with a Defined Benefit (DB) pension scheme issued 20 profit warnings in Q3, the highest quarterly total of 2024 so far, according to EY-Parthenon’s latest Profit Warnings report.

The 20 warnings issued between July and September represented the same figure as Q3 2023, but a 33% increase on the 15 warnings issued in Q2 2024, and made up 24% of the 84 profit warnings issued by UK-listed companies during the quarter.

The rise in Q3 warnings issued means almost a quarter (23%) of UK-listed companies with a DB pension scheme have issued a profit warning in the last 12 months.

Companies with DB sponsors in the FTSE Industrial Support Services sector issued the most warnings in Q3 (six), closely followed by FTSE Industrial Engineering (four).

Contract issues remain the key driver for profit warnings from companies with a DB pension scheme

Contract issues (30%), rising costs (20%) and credit tightening (20%) were cited as the main reasons for warnings from UK-listed companies with a DB sponsor. For the first time this year, labour market issues were not cited as a reason for any warnings from companies with a DB pension scheme.

Karina Brookes, UK Pensions Covenant Advisory Leader and EY-Parthenon Partner, said: “Uncertainty has been a persistent feature of the business environment for several years now. This pressure intensified over the summer as companies awaited the new Chancellor’s Autumn Budget and faced heightened geopolitical tensions. The latest profit warning data gives us a real-time indicator of this shift in business sentiment and the impact it can have on company earnings.

“In this environment, against a backdrop of the new DB funding code and better funded pension schemes, it’s still important for schemes to monitor if the sponsor covenant can support the scheme’s risk level, as even low dependency on covenant will mean that some covenant reliance remains especially for those adopting a run-on strategy. Both corporate and scheme positions can shift quickly, so having flexible plans in place which can be adopted quickly when circumstances change will be key in securing the best possible outcome for scheme members.”

Paul Kitson, UK Pensions Consulting Leader at EY, added: “Despite quarterly profit warnings from companies with a DB pension scheme hitting their highest level this year, DB funding has remained robust throughout 2024. DB pension schemes have approximately £250bn of surplus assets, so it raises the question of whether and how UK-listed companies with a DB pension scheme could more easily utilise that surplus when facing market challenges.”