Record number of profit warnings for North West firms

Latest Profit Warnings report from accountancy firm EY reveals the worst-hit listed companies were those in the retail, travel and leisure sectors. Tony McDonough reports

Sam Woodward
Sam Woodward, EY restructuring partner in the North West

 

Listed companies in the North West issued a record number of profit warnings in the first quarter of 2020 alone, new figures show.

Accountancy firm EY’s latest Profit Warnings report reveals the record 27 profits warnings in the region between January 1 and March 31 – more than three times the number issued in the same quarter last year (eight in Q1 2019) and a 238% increase year-on-year.

Unsurprisingly, a significant number of the warnings were attributed to the coronavirus crisis, which has temporarily paralysed many businesses, with very few sectors immune from its effects. In the North West, profit warnings were spread across a wide range of sectors, with retailers, and travel and leisure hardest hit, accounting for almost 30% of all North West profit warnings in the first quarter this year.

Sam Woodward, EY restructuring partner in the North West, said: “The sectors issuing the highest number of profit warnings in the North West were those most exposed to the impact of the national lockdown.

“However, we were already seeing an increasing trend in the number of warnings, and in many cases, companies were already showing signs of stress. COVID-19 has undoubtedly created new problems, but it has also accelerated existing structural challenges and exacerbated existing weaknesses.

“When lockdown lifts, it will ease pressures for some, but a number of underlying issues will remain.”

There were 301 profit warnings issued by UK-listed businesses in Q1 2020, almost equal to the entire number issued in the whole of 2019 (313) and 5% higher than the total for 2018 (287). Compared to the same period last year (Q1 2019), warnings rose from 89, representing a 238% year-on-year increase.

Although 77% of profit warnings blamed COVID-19 in the first quarter of 2020, it is worth noting that significant parts of UK plc were struggling before the pandemic. In January 2020, EY recorded warnings had increased by 43% year-on-year, when compared to the same month last year.

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