Increase in profit warnings reflects UK’s unpredictable economic climate

Increase in profit warnings reflects UK's unpredictable economic climate - Rothera Sharp Solicitors, Nottingham, Nottinghamshire

If you count a listed company among your customers you’ll no doubt keep an eye on their Stock Market manoeuvres – careful to gauge just how the company is performing for its shareholders, and whether it’s likely to change its payment times.

With this in mind, it’s worth considering that, according to new figures from accountancy giant EY, three profit warnings were issued in the East Midlands in the third quarter of 2017, compared to one in the previous quarter and three in the same quarter of last year. According to EY’s latest Profit Warnings report, the increase in profit warnings recorded from July to September reflects the “unpredictable economic climate”.

EY says that East Midlands quoted companies have issued ten profit warnings so far in 2017, compared to 13 warnings in the first three quarters of 2016 – a welcome downwards trend.

However, across the UK, profit warnings have seen the biggest quarterly rise in almost six years. UK quoted companies issued 75 profit warnings in Q3 2017, significantly above the average levels of warnings (62) for a third quarter and up from the 45 issued in Q2.

EY points out that this high number of profit warnings exposes a “growing divergence between those sectors of the UK economy more exposed to domestic pressures and those benefiting from growth in overseas markets”. Pricing and cost pressures feature in 25% of all profit warnings so far in 2017, compared with 16% in 2016. So, it’s worth checking where your customers operate.

FTSE General Retailers’ warnings hit their highest third quarter total since 2008 in Q3 2017 with eight warnings and 31% of the sector warning in the year-to-date. Home improvement retailers make up almost half of retail warnings in the last six months, an early warning of falling confidence and increasing pressure on discretionary spend, according to the report.

According to the report, profit warnings from the FTSE Travel & Leisure sector fell back from their peak of eight in Q1 2017 to four in Q2, edging back up to five in Q3. However, one-fifth of all FTSE Travel & Leisure companies have warned in the past year and the data shows a substantial increase in warnings from the Restaurants & Bars sector, while a number of airline failures have also put the sector back in the spotlight.

In both cases, the biggest issues are the impact of oversupply and rising costs for businesses that are already struggling with thin margins.

If you’re worried about your creditors struggling with these issues – and the knock-on effect they will have for your business, please do get in touch.

If you need Debt Recovery assistance, Rothera Sharp have the team for you. Call our solicitors on 0800 088 6280 or email enquiries@rotherasharp.co.uk

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Terhi Sygrove - Rothera Sharp Solicitors, Nottingham