Brexit uncertainty and falling pound sparks rise in profit warnings

EY’s latest Profit Warnings report revealed quoted firms in the North West issued eight profit warnings, with a further six in Yorkshire and two in the North East during this period. Tony McDonough reports.

The Brexit vote has sparked a rise in profit warnings
The Brexit vote has sparked a rise in profit warnings

Quoted companies in the North of England issued 16 profit warnings in the third quarter of 2016 – the highest third quarter total since the 2008 recession.

EY’s latest Profit Warnings report also revealed quoted firms in the North West issued eight profit warnings, with a further six in Yorkshire and two in the North East during this period.

The worst hit region was London and the South East where companies issued 38 warnings in the third quarter of 2016 – more than half the total number of warnings issued in total across the UK.

In the UK, the number of profit warnings jumped to 68, two more than the previous quarter, but 11 fewer than the same period in 2015, with almost a third of companies (20) citing Brexit as a contributing factor.

Nevertheless, the initial Brexit impact has been missed and the negative effects have been focused on sectors most exposed to business uncertainty and the weaker pound.

Most companies also blamed other factors, including falling sales and difficult conditions in their own sector.

Overall, the FTSE sectors leading profit warnings in Q3 2016 were: Support Services (12), General Retailers (6), Travel & Leisure (5), Household Goods (5) and Industrial Engineering (5).

Sam Woodward, restructuring partner at EY in the North West, said: “Companies in the North of England are contending with a daunting level of uncertainty.

“The fallout from Brexit has impacted profit warnings nationally and we’re beginning to see the mirrored effects in the regions.

“Sluggish, disrupted and competitive markets don’t provide companies with the luxury of standing still – whatever the outlook.

“Companies will need to remain agile in their operations and capital structures to ensure they are resilient in the face of new challenges – and to grasp opportunities.”

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