Global companies have been hit with a brutal $320 billion in lost profit since 2017, and it has nothing to do with bad management.
This is the cost of doing business in a world where economic shocks and political instability keep crashing into each other.
According to research by EY-Parthenon, nearly 3,500 publicly listed companies with yearly revenues above $1 billion lost earnings during years of intense volatility. From massive inflation to wars and market meltdowns, the fallout has reached every corner of the global economy.
Mats Persson, the UK lead for macro and geostrategy at EY-Parthenon, said the days of easy money and stable geopolitics are gone.
“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,” he said.
China’s companies took the hardest blow while others held on
The report showed that about 25% of the companies in the study lost 5% or more of their profit margins over the past three years. The damage was measured using EBITDA; earnings before interest, taxes, depreciation, and amortization.
That drop didn’t come out of nowhere. In just three years, global markets were rocked by surging inflation, Russia’s war in Ukraine, the collapse of the UK’s gilt market, the Israel-Hamas conflict, and the return of Donald Trump to the White House in 2024.
During that time, 40% of FTSE 100 market value changes happened on the exact days when major geopolitical or economic events were unfolding. And out of the 833 Chinese companies that met the revenue threshold, 40% experienced serious profit damage.
The total hit reached $73 billion. Most of the losses came from the real estate, steel, and construction sectors, all of which were exposed to both internal and global pressures.
The UK saw less damage, but not because it was immune. Just 100 UK companies qualified for the analysis, and 14 of them took losses. Their total EBITDA drop added up to $2.5 billion over three years. While not as dramatic as China, the hits still showed how even relatively smaller markets have struggled to stay profitable during periods of chaos.
Still, some companies found ways to grow despite the chaos. But the list is short. The research found that only one in ten global companies who had top-quartile EBITDA margins in 2014 managed to keep those margins by 2024. Survival isn’t enough. Maintaining dominance takes a complete overhaul.
In the UK, a few names stood out, like the fashion chain Next, the chemical manufacturer Croda, the mining company Rio Tinto, and the engineering company Spirax kept moving forward.
In America, Caterpillar, UPS, Pfizer, Merck, and Johnson & Johnson managed to boost earnings above their respective sector averages.
EY-Parthenon’s Persson explained why those businesses outperformed, saying, “The businesses that had been able to either protect or achieve top margins have successfully diversified their portfolio, managed their cost base, identified and understood various policy changes and updated their governance to reflect a different world.”