Contract and project delays account for FTSE UK-listed construction companies posting of the year’s third most profit warnings.
UK-listed construction companies issued five profit warnings in the first quarter of the year – matching the total for all of 2024.
The latest quarterly total marks a fivefold year-on-year increase during the same period previous, and the highest number issued across the sector since Q4 2023.
The findings were published in the latest EY-Parthenon Profit Warnings report.
Construction and Materials was revealed to be one of the FTSE sectors with the highest number of profit warnings during the first quarter.
Rising uncertainty was named as the primary challenge with four out of the five warnings citing delays in contract commencements and project timelines.
The latest figure – the highest quarterly total since Q4 2023’s six warnings – was behind only software and computer services, which issued 10 warnings, and industrial support services, nine.
In 2024, the construction sector experienced a significant drop in profit warnings following two years of heightened alerts.
Improved market conditions helped, supported by stronger repair and maintenance demand, easing cost pressures, lower interest rates, and increased government investment in infrastructure.
However, operational delays, ongoing pricing issues, and high-profile insolvencies have underscored ongoing vulnerabilities in the sector, as well as regulatory pressures, such as the Building Safety Act.
Recent S&P Global UK Construction PMI surveys reinforce these concerns.
Including the beginning of the second quarter, more than one in five (22 per cent) of listed construction and materials companies have now issued a profit warning so far this year.
Tom Watson, partner, construction and property services M&A, at EY-Parthenon, said: “Despite market conditions for the construction sector showing clear signs of improvement in 2024, our latest data shows that structural weaknesses persist as fresh challenges continue to emerge.
“The increase in employer National Insurance contributions will further impact budgets already under pressure from a persistent shortage of skilled labour, while delays to contract start dates and project timelines place added strain.
“Navigating these challenges amidst the ongoing heightened economic uncertainty will require the agility to strategically adapt.”
In total, there were 62 profit warnings issued by UK-listed companies in the first quarter, with a record two in five (40 per cent) citing contract and order cancellations or delays as a leading factor behind the warning.
Policy change and geopolitical uncertainty (26 per cent) and labour market issues (18 per cent) were cited as the other main drivers for warnings.
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