Military action by the US and Israel across the Middle East region has contributed to multiple profit warnings issued by listed companies with defined benefit (DB) pension schemes, new data indicates.
Research by EY-Parthenon found that in the first half of the year, 27 profit warnings were issued by UK companies that sponsor at least one DB pension scheme – accounting for almost a quarter of all profit warnings issued in this period. Of these, two-thirds cited the impact of geopolitical uncertainty and policy change.
The firm said this was the “highest proportion ever recorded for this cause” by its study, which has been running for more than 25 years. Rising costs were also a factor in a third (34%) of profit warnings, EY-Parthenon found.
Housebuilders were among those most affected, the research showed, with consumer goods companies also hit. The 27 profit warnings recorded in the first half of 2026 marked a decrease from 34 in the first half of 2025.
Karina Brookes, UK pensions covenant advisory leader and EY-Parthenon partner, said: “The impact of the current geopolitical uncertainty is continuing to cause challenges for sponsors, with the conflict in the Middle East fuelling higher energy and input costs and weaker consumer confidence.
“In these times of continued turbulence, it is crucial for trustees to remain closely engaged with the sponsor to understand the range of scenarios that might have a meaningful impact on sponsor support. Monitoring triggers and levers to protect schemes against the impact of these prolonged macroeconomic challenges facing UK corporates can be an appropriate and proportionate mechanism.”
However, Paul Kitson, UK pensions consulting leader at EY, added that strong DB funding positions would “likely bring some reassurance” for trustee boards and sponsors.
Kitson continued: “This creates greater flexibility to align on long-term objectives and proactively assess how schemes can deliver value. As the market evolves, now is a good time to explore the full range of new opportunities available to well-funded schemes.”
Keeping geopolitical risk on the agenda
Pensions Expert recently asked several investment consultants and advisers for their pick of emerging risks for trustees to be wary of for the rest of 2026. Several highlighted geopolitics in one way or another.
“The world is becoming less integrated and more focused on economic security, supply-chain resilience, energy independence and access to critical technologies… Trustees should consider whether portfolios remain resilient under a more fragmented global economy, particularly given the concentration of supply chains and capital markets around a relatively small number of countries and companies. Unlike a traditional market correction, geopolitical shock can affect multiple asset classes simultaneously and may prove difficult to diversify away.”
“We’re well aware of the global conflicts and foreign policies that can impact markets and lead to systemic risk. However, there could also be emerging domestic risks as the new Labour government continues to establish its new mandate and consider financial policies for the future. The gilt market will be taking close watch of any policy changes, which have the opportunity to disrupt funding levels for those less well-hedged schemes, as well as long-term plans if you are not resilient.”
“[Geopolitical uncertainty and its effects] could challenge the traditional assumptions that government bonds will reliably diversify growth assets, for example, or that certain asset classes will behave as they did in the past. The theme is therefore to rise above traditional asset-liability management outputs and focus on portfolio resilience in a structurally different regime – considering not just expected returns but how different assets behave when inflation, rates, and geopolitics move together unexpectedly.”
