UK results preview 2025: reason for optimism

Some mild earnings beats have been forecast in the weeks ahead after a City bank said consensus estimates have been scaled back too far in the wake of April’s tariffs.

Previewing the UK’s forthcoming half-year results season, Deutsche Bank said annual and interim FTSE 100 earnings estimates were 7% lower than April’s level due to worries about the impact of US tariffs and a potential trade war on global growth.

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The downgrades now imply a 6% year-on-year decline in first-half earnings, or flat performance when excluding the energy sector.

The bank said: “While revisions have been less negative in the past weeks, consensus estimates still look too low in our view given the relent in the trade war compared to April, hence we see room for some mild beats.”

Since April, half-year and 2025 earnings estimates for small and mid-cap companies have been revised downwards to a lesser extent than their larger peers.

The FTSE 250 is comparatively less exposed to international trade tensions, while the UK enjoyed strong sequential GDP growth in the first quarter and is expected to have seen some further expansion in the second quarter.

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There’s also been the benefit of 50 basis points of interest rate cuts by the Bank of England.

Deutsche Bank expects FTSE 100 earnings to increase by almost 2% this year, supported by a slight improvement in GDP growth in the UK and eurozone, declining trade uncertainty and further rate cuts by the Bank of England and European Central Bank.

It points out that since April FTSE 100 full-year earnings have been revised down slightly more than in the STOXX 600 even though the UK should be less exposed to trade uncertainty.

“This leaves room for some upside revisions in our view. However, UK politics, trade uncertainty and a stronger pound pose downside risks to our forecasts, and we will keep monitoring these developments.”

The bank said its analysis of conference calls relating to the first-quarter results of FTSE 100 companies showed most left their guidance unchanged.

Other takeaways from these calls included potential uncertainty around the second-order effects of tariffs and the headwind of a weakening US dollar for some companies.

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On higher national insurance contributions, a handful of companies mentioned their ability to maintain cost guidance or pursue efficiency programmes in order to mitigate the impact.

Deutsche Bank said that first-half earnings growth will be strongest in real estate and consumer discretionary sectors, offset by continued weakness in energy and basic materials.

These two struggling sectors have been the subject of full-year downgrades of 19% and 22% respectively since April, alongside a 7% cut in telecommunications.

FTSE 100 earnings revisions in real estate, consumer staples, industrials, healthcare and financials have been in the region of 3-4% lower.

Deutsche Bank added that a lower comparative return in financials and a lower weight in industrials have contributed to the FTSE 100 underperformance versus the Euro Stoxx in the year-to-date.

The three best-performing stocks in the FTSE 100 so far in 2025 have been Fresnillo (LSE:FRES), Babcock International Group (LSE:BAB) and Rolls-Royce Holdings (LSE:RR.), with WPP (LSE:WPP), Bunzl (LSE:BNZL) and Diageo (LSE:DGE) the worst.