Geopolitical shifts drove 60% of FTSE gains, EY-Parthenon finds

Geopolitical and macroeconomic events have played an outsized role in shaping corporate profits and value over the past decade, with most UK stock market gains concentrated around major global events, according to new research by EY-Parthenon.

The consultancy’s analysis found that almost 60% of FTSE 100 returns in the past 10 years were generated on just 59 trading days per year – about 16% of the time – that coincided with significant geopolitical or economic events.

Between 2017 and 2024, the 3,500 largest listed businesses worldwide lost a combined $320bn (£236bn) in profit during periods of geopolitical and macroeconomic uncertainty. One in four firms experienced a fall in profit margins of 5% or more over the period, while only one in 10 managed to maintain a top-quartile EBITDA margin.

Mats Persson, EY-Parthenon UK macro and geostrategy leader, said: “After years of cheap money and relative geopolitical stability, a wave of macro shifts – from trade tensions to global conflicts – now means that government policy and global events are having a greater impact on value and profits than in many decades.

“This new environment is creating winners and losers. A cohort of businesses in our study in geopolitically exposed sectors and regions managed to either protect or achieve top margins during periods of significant macro uncertainty.”

The analysis, by EY-Parthenon’s new macro and geostrategy practice, examined nearly 3,500 global firms with revenue above $1bn (£740m). It found that the rate at which top-performing firms fell to underperforming or distressed status within 24 months nearly doubled to 11.1% in 2022–24 compared to 2014–16. Conversely, 5% of firms moved from underperforming or distressed to top-performing during the decade.

Of the 833 firms analysed in China, 40% experienced a combined EBITDA erosion of almost $73bn (£53bn), largely in the real estate, steel and construction sectors. Among the 100 UK firms assessed, 14 saw significant margin erosion, with $2.5bn (£1.8bn) in profits lost during periods of macro volatility.

Persson added: “No company can fully control the macro environment, but firms which have performed well and managed to protect and grow their EBITDA margins during times of macro change share a few clear traits. They actively build macroeconomic and geopolitical analysis into their strategy decisions, diversify their portfolios to avoid over-reliance on any single policy or region, and use practical, actionable scenario planning linked to clear triggers and KPIs.