Investment in technology including AI essential as UK retailers grapple with various ongoing pressures

UK listed retailers issued seven profit warnings during Q2 2025, more than double the amount recorded in the previous quarter, according to a report from EY Parthenon.

Silvia Rindone, EY Partner and UK&I Retail Lead, says: “This spike highlights both softening consumer demand and the deeper structural headwinds facing the sector. Retailers we speak to tell us that falling sales are currently indicative of a longer-term shift, with consumers becoming more value focused and less brand loyal, which leaves cost pressured retailers in a bind."

“Despite ongoing pressures, including the rise in national insurance contributions and the national living wage, alongside tariffs, investment in technology including AI remains essential. The winners will be those who get the basics right, such as range, service, and pricing, whilst continuing to build for the future with leaner models, sharper propositions and digital resilience.” 

Nationally, in Q2 2025, the number of profit warnings issued by UK listed companies rose by 20% to 59 compared to 49 in the same period last year. Over the last 12 months, 19% of UK listed businesses have issued at least one profit warning.

The leading factor behind profit warnings during the second quarter was policy change and geopolitical uncertainty, cited in 46% of warnings. This marked a significant increase from just 4% in Q2 2024, and the highest percentage recorded for this cause in more than 25 years of EY’s analysis.

The proportion of profit warnings to cite contract and order cancellations or delays in Q2 remained at a record 40%. One in three warnings cited tariff related impacts, including weaker demand, supply chain disruption, and exchange rate volatility.

Jo Robinson, EY-Parthenon Partner and UK&I Turnaround and Restructuring Strategy Leader, says: “The latest profit warnings data reflects the scale of persistent uncertainty and how heavy it continues to weigh on UK businesses. While this uncertainty has been a recurring theme since mid-2024, it has intensified so far this year - driven largely by geopolitical tensions and policy shifts - compounding pressure on both earnings and forecasts."

“While the announcement of global tariffs has clearly played a part in amplifying uncertainty, they are just one factor among broader geopolitical and policy upheaval. These pressures are often interlinked and, combined, they are having a significant effect on companies’ confidence, decision-making and spending."

“Whether the rise in profit warnings is cyclical or structural remains to be seen, and we still expect earnings pressure to ebb and flow with the macroeconomic backdrop. As companies operate in a risk and forecasting environment that is challenging to navigate, they must adopt a measured, scenario-based approach that balances both agility and strategic clarity.”

RTIH AI in Retail Awards

RTIH, organiser of the industry leading RTIH Innovation Awards, proudly brings you the first edition of the RTIH AI in Retail Awards, which is now open for entries. 

As we witness a digital transformation revolution across all channels, AI tools are reshaping the omnichannel game, from personalising customer experiences to optimising inventory, uncovering insights into consumer behaviour, and enhancing the human element of retailers' businesses.

With 2025 set to be the year when AI and especially gen AI shake off the ‘heavily hyped’ tag and become embedded in retail business processes, our newly launched awards celebrate global technology innovation in a fast moving omnichannel world and the resulting benefits for retailers, shoppers and employees.

Our 2025 winners will be those companies who not only recognise the potential of AI, but also make it usable in everyday work - resulting in more efficiency and innovation in all areas.

Winners will be announced at an evening event at The Barbican in Central London on Wednesday, 3rd September.