The first half of 2025 saw a modest rebound in U.K. corporate earnings, with financial firms leading the gains while energy companies continued to weigh on overall results, according to a recent note from Deutsche Bank Research.
FTSE 100 earnings fell 2% year-on-year in H1, an improvement compared with the 5% decline recorded in the latter half of 2024. Stripping out the energy sector, earnings actually rose 5%. Around 70% of companies surpassed analyst expectations, producing an aggregate earnings surprise of 5%.
Sequentially, earnings rose 7% compared with late 2024, benefiting from stronger GDP growth and more favorable comparisons. Financials and industrials contributed most to the gains, while energy and basic materials remained the weakest performers.
Overall sales dipped 1% year-on-year but still exceeded forecasts by 2%, supported by strong performance in financials and consumer discretionary sectors. Margins widened as earnings outpaced revenue growth.
Guidance from U.K. companies remained largely stable, though upgrades outnumbered downgrades. Approximately 27% of firms raised their outlooks, compared with just 8% issuing reductions, with most upgrades coming from financials, staples, and industrials.
For the full year, consensus forecasts still anticipate a 2% decline in FTSE 100 earnings, or a 2% increase if energy is excluded. Estimates remain below pre-2024 trade deal levels, despite the U.K. economy expanding 0.3% in Q2, making it the second fastest-growing G7 economy in H1. Deutsche Bank expects FTSE 100 earnings to rise close to 2% in 2025, noting that consensus may be conservative given stronger GDP growth and easing trade uncertainties.
In the FTSE 250, where roughly a third of companies had reported, earnings grew 5% year-on-year and beat expectations by the mid-teens collectively. Much of this strength was driven by Ocado (LSE:OCDO). Excluding Ocado, earnings fell 3% and missed estimates by mid-single digits. Staples and technology sectors provided the strongest support, while consumer discretionary and basic materials dragged on performance.
Looking ahead, consensus anticipates low-teens earnings growth in H2 for the FTSE 250, with small- and mid-cap firms expected to grow around 8%, while large-cap companies may see a 2% decline.
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