Latest Profit Warnings report from EY reports a 48% increase in North West profits warnings in 2020 as the COVID-19 hit the retail and leisure sectors hard. Tony McDonough reports
Profit warnings by North West stock market listed business soarer by 45% in 2020 with retail, leisure and travel the hardest hit sectors.
Accountancy firm EY’s latest Profit Warnings report reveals there were 48 profits warnings from North West businesses in 2020 – up from 33 in 2019. They were heavily weighted towards the first quarter of the year, when 29 were issued.
More than 80% of businesses who issued warnings blamed the impact of the COVID-19 pandemic. Retail, leisure and travel businesses were particularly hard hit by lockdowns and travel restrictions and accounted for 16 of the warnings.
Sam Woodward, EY-Parthenon turnaround and restructuring strategy partner in the North West, said: “The majority of North West businesses issuing profit warnings last year did so in the first quarter and 83% of all profit warnings issued during the year cited COVID-19 as a factor, many in the wake of the initial shock of the first lockdown in March.
“Since then, retailers and leisure business continue to be severely impacted, but profit warning levels have fallen as the year has progressed. Many businesses have been treading on thin ice for months with Government support propping them up.
“While there is speculation these measures could be extended until the summer, the countdown has started, and in weeks or months we’ll find out how many companies can keep their head above water.”
During the year the number of UK listed companies at risk of insolvency has doubled. In 2020, there was a surge in the number of UK listed companies issuing three or more profit warnings in a 12-month period – typically up to one in five of these companies enter administration within 12 months of the third warning.
And 62 UK listed companies issued at least their third profit warning in 2020. These companies represent 5% of all UK listed companies, and 10% of the FTSE 350. The 2020 total (62) is almost double that of 2019 when there were 32 and is more than double the 31 recorded in 2018.
A total of 583 profit warnings were issued by UK listed companies in 2020, this is the highest annual total in 21 years of EY research – 15% higher than the previous record of 506 in 2001. This historic high contrasts with very low levels of corporate insolvency.
Mr Woodward added: “The record-breaking levels of profit warnings, particularly from the first half of the year, are at odds with the significantly low number of corporate insolvencies. Insolvencies in the UK haven’t been dodged, they’ve been deferred and we’re likely to see an influx of these from spring onwards.”